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HMRC internal manual

Capital Gains Manual

Restrictions: anti-flooding rule: alternative pre-entry loss

TCGA92/SCH7A/PARA4 (6) - (8) & (14)

If there is a pre-entry loss computed under paragraph 4(2) or (3) Schedule 7A, but the amount of `the alternative pre-entry loss’ is smaller, paragraph 4(6) Schedule 7A permits an election to reduce the pre-entry loss to the smaller amount. The alternative pre-entry loss is computed under paragraph 4(7) and (8). This is the amount which would have been the pre-entry loss if the disposal were treated as a disposal of the pre-entry assets in the pool in priority to the post-entry assets in the pool. This notional identification rule reverses the order of priority in paragraph 3(4) Schedule 7A. It does not affect, for any purposes other than computing the alternative pre-entry loss, what parts of a pool consist respectively of pre-entry assets and post-entry assets, paragraph 4(14) Schedule 7A.

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.