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HMRC internal manual

Capital Gains Manual

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Restrictions: pre-entry loss: anti-flooding rule for pooled assets

TCGA92/SCH7A/PARA4 (1)

The rules which prevent this result are in paragraph 4 Schedule 7A. Paragraph 4 applies where the following conditions are satisfied.

  • There is a disposal out of a pool which includes pre-entry assets.
  • The disposal is wholly or partly a disposal of post-entry assets.
  • There is a loss on the disposal (the actual loss).
  • The relevant allowable expenditure allowed as a deduction, see CG47682, in computing the allowable loss exceeds the relevant allowable expenditure attributable to the post-entry element of the disposal, see CG47684.

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.