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HMRC internal manual

Capital Gains Manual

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

TCGA92/SCH7A/PARA7 (1) (b) & (3)

The extension of the loss set-off rules in paragraph 7(3) Schedule 7A covers the case where two or more companies leave one group and join another group at the same time. A realised loss brought into the new group by one of those companies can be deducted from a gain realised by that company on an asset held by another of those companies immediately before it joined the new group. But see CG47780+ concerning the case where there are post-entry additions to a gain asset held at the time of entry.


In 1995, the loss vehicle LV disposes of asset A and realises a loss £4M.

In 1996, LV and LW together leave the L group and join the M group. LW holds asset B.

In 1997, LW disposes of asset B at no gain/no loss to LV.

In 1998, LV sells asset B and realises a gain.

Paragraph 7(3)(a) treats LV as having held asset B immediately before it joined the group. So LV can deduct the loss on asset A 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.