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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Restrictions: pre-entry loss: time-apportionment: no gain/loss xfers

TCGA92/SCH7A/PARA2 (5) - (7)

If the company which brought the loss asset into the group acquired it on a no gain/no loss transaction, time-apportionment runs from the acquisition by the transferor in the no gain/no loss transaction. In a sequence of no gain/no loss transactions, time-apportionment runs from the acquisition by the first transferor in the sequence. The effect of this rule is that time-apportionment may run from a date before the company making the disposal came into existence, or before it joined its previous group.

Example

In 1994, LV leaves the L group and joins the M group holding an asset which LV sells at a loss in 1996. Within the L group, the asset was acquired by LR in 1983 from an unconnected third party. There were subsequent no gain/no loss disposals from LR to LS, from LS to LT, and from LT to LV.

Time-apportionment runs from 1983, when LR acquired the asset. In the time-apportionment formula D is the period from 1983 (LR acquired asset) to 1994 (LV joined M group). E is the period from 1983 (LR acquired asset) to 1996 (LV sells asset).

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.