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HMRC internal manual

Capital Gains Manual

Gains from which pre-entry losses are deductible: single company case

TCGA92/SCH7A/PARA7 (1) (b)

If a company joining a group has a loss realised pre-entry, the loss can be deducted from any gain which the company realises on a later disposal of an asset held immediately before it entered the group. But see CG47780+ concerning the case where there are post-entry additions to a gain asset held at the time of entry.


In 1994, the loss vehicle LV disposes of asset A and realises a loss £3M.

In 1995, LV leaves the L group and joins the M group holding asset B.

In 1996, LV sells asset B and realises a gain £5M.

The loss on asset A can be deducted from the gain on asset B.

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.