CG47689 - Restrictions: pre-entry loss: anti-flooding rule for pooled assets
Paragraph 4(3) to Schedule 7A of the Taxation of Chargeable Gains Act (TCGA) 1992
If some but not all of the assets disposed of are pre-entry assets, the actual loss is treated by paragraph 3 to Schedule 7A TCGA 1992 as a loss on the disposal of a pre-entry asset. And the supplemental rules increasing the pre-entry loss, by reference to a comparison between post-entry expenditure and expenditure actually allowed, are in paragraph 4(3) and (4) Schedule 7A TCGA 1992.
Note: Additional rules relating to loss buying were enacted in the Finance Act (FA) 2006. See CG47020+ for guidance on the rules which apply in priority to Schedule 7A TCGA 1992 for accounting periods ending on or after 5 December 2005.
Section 46 of the Finance Act (FA) 2011 and Schedule 11 FA 2011 greatly simplified the rules in Schedule 7A TCGA 1992 for the deduction of losses on or after 19 July 2011. See CG47400+ for guidance on loss streaming from that date.
If
- paragraph 3 Schedule 7A TCGA 1992 treats the actual loss as a loss on the disposal of a pre-entry asset,
and
- the expenditure actually allowed exceeds the actual cost of the assets to which the disposal is treated as relating, see CG47691
the pre-entry loss is the sum of
- that excess, and
- what the pre-entry loss would be apart from paragraph 4(3) Schedule 7A TCGA 1992
except that the pre-entry loss cannot exceed the actual loss.
Paragraph 4(5) to Schedule 7A TCGA 1992
The general rule in paragraph 5 Schedule 7A TCGA 1992, see CG47720+, is that companies can elect to compute the pre-entry proportion of an allowable loss by reference to the asset's market value at the relevant time (see CG47567). But this rule in paragraph 5 Schedule 7A TCGA 1992 for a market value election is set aside by paragraph 4(5) Schedule 7A TCGA 1992 in cases within the special rules for pooled assets in paragraph 4(2) and (3) Schedule 7A TCGA 1992. Instead, there is a separate election right in paragraph 4(6) Schedule 7A TCGA 1992 which can take account of the market value of the pooled assets at the relevant time.
Note: Additional rules relating to loss buying were enacted in FA 2006. See CG47020+ for guidance on the rules which apply in priority to Schedule 7A TCGA 1992 for accounting periods ending on or after 5 December 2005.
Section 46 FA 2011 and Schedule 11 FA 2011 greatly simplified the rules in Schedule 7A TCGA 1992 for the deduction of losses on or after 19 July 2011. See CG47400+ for guidance on loss streaming from that date.