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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Restrictions: pre-entry loss: alternative market value calculation

TCGA92/SCH7A/PARA5 (1) - (3)

As an alternative to the time-apportionment method of computing the pre-entry proportion of the loss, paragraph 5 Schedule 7A permits the pre-entry loss to be computed by reference to market value at the relevant time (CG47567). If an allowable loss accrues to a company on the disposal of a pre-entry asset, and the company so elects, the pre-entry proportion of the loss is the smaller of

  • the allowable loss on the disposal
  • the loss which would have accrued if the asset had been disposed of at market value at the relevant time, see CG47567.

Special rules apply where the actual disposal took place on or after 30 November 1993, but the market value calculation would be by reference to a date before 30 November 1993, see CG47722+.


All the transactions and events in this example take place on 1 January in the year concerned.

In 1983, company LV acquires an asset for £10M.

In 1988, LV joins the M group at a time when the market value of the asset is £7M.

In 1993, LV sells the asset for £2M.

The allowable loss is £14.69M computed as follows.


Proceeds                               2.00

Cost                                     10.00

Indexation 1983-1993     _ 6.69_

Allowable loss                   (14.69)

The time-apportioned loss is        (14.69)          x             \_5\_        =             (7.34)


LV makes an election for the pre-entry loss to be computed by reference to a deemed disposal in 1988 at market value £7M. The market value computation of the pre-entry loss is £5.5M

proceeds 7.00
cost 10.00
indexation 1983-1988 2.5
pre-entry loss 5.5

If the market value of the asset in 1988 had been £12.5M or any greater amount, the election would have eliminated the pre-entry proportion of the allowable loss.

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.