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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Restrictions: pre-entry loss: time-apportionment


Paragraph 2(8A) Schedule 7A adjusts the time-apportionment formula for assets which can be traced back through an unbroken sequence of no gain/no loss disposals to 31 March 1982. Under TCGA92/S55 (7) - (9), amounts which had been incorporated in cost under TCGA92/S56 (2) on no gain/no loss transfers prior to 30 November 1993, but which were later removed by TCGA92/S55 (6)(b), may create or increase a loss, see CG17760+. These amounts are referred to as `rolled-up indexation’. For the purpose of the time-apportionment formula, you should

  • increase the total amount of all the relevant allowable expenditure, C, by the amount of the rolled-up indexation,


  • increase each item of relevant allowable expenditure, B, by so much of the rolled-up indexation as relates to that item.


This example is based on the example at CG47623. 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 1990, the asset is transferred at no gain/no loss to A’s subsidiary, B.

In 1991, A and B join the relevant group.

In 1992, B incurs expenditure £1M on the same asset.

In 1995, B transfers the asset at no gain/no loss to X.

In 1998, X disposes of the asset for £4M.

The allowable loss on the disposal would be £13M, as in CG47623, but is increased by the rolled-up indexation which will have been included in B’s acquisition cost of the asset on the no gain/no loss transfer on 1 January 1990, see CG17760+. The loss cannot, however, be increased by any amounts in respect of the no gain/no loss transfer on 1 January 1995.

The amount of rolled-up indexation will be:

in respect of the expenditure in 1980, £10M x 0.504 5.040
in respect of the expenditure in 1989, £6M x 0.077 0.462
Total rolled-up indexation       5.502

The total allowable loss will therefore be £13M + £5.502M = £18.502M.

The pre-entry proportion of the allowable loss is the total which results from applying time-apportionment to each tranche of expenditure. The total of rolled-up indexation, £5.502M, is added to the total of all the relevant allowable expenditure, C, and the individual items of relevant allowable expenditure are increased by the amount of rolled-up indexation relating to them, as follows:

18.502 x 10 + 5.040 x 8.75 = 6.870
    17 + 5.502   15.75 =  
18.502 x 6 + 0.462 x 2 = 1.105
    17 + 5.502 x 9 =  
18.502 x 1 x   = nil
    17   6    
pre-entry proportion of allowable loss 7.975          

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.