Restrictions: pre-entry loss: time-apportionment: allowable expenditure
For disposals on or after 30 November 1993, the extent to which indexation allowance can create or increase a loss is subject to restrictions, see CG17700+. The example below shows how the above computation would change if the disposal of the asset were in January 1994, rather than January 1993.
All events take place on 1 January in the year referred to.
In 1980, a company acquires an asset for £10M.
In 1989, the company incurs expenditure £6M on the same asset.
In 1991, the company holding the asset joins the relevant group.
In 1992, the company incurs expenditure £1M on the same asset.
In 1994, the company disposes of the asset for £4M.
The allowable loss on the disposal is £13M computed as follows.
|to 1994 (£M)||Total (£M)|
The pre-entry proportion of the allowable loss is the total which results from applying time-apportionment to each tranche of expenditure.
|pre-entry proportion of allowable loss||7.530|
Note: Additional rules relating to loss buying were enacted in FA 2006. See CG47020+ for guidance on the rules which apply in priority to TCGA92/SCH7A for accounting periods ending on or after 5 December 2005.
FA11/S46 and FA11/SCH11 greatly simplified the rules in TCGA92/SCH7A for the deduction of losses on or after 19 July 2011. See CG47400+ for guidance on loss streaming from that date.