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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) (c)

If a company joining a group has a loss realised pre-entry, the loss can be deducted from a gain on a trade asset satisfying the following conditions.

  • The company acquired the asset on or after the date it joined the new group from a person who was not a group member at the time of acquisition, and
  • since the acquisition from outside the new group, the asset has been used or held exclusively for the purposes of a trade which the joining company carried on immediately before it became a member of the new group and which it continued to carry on until the disposal.

There are supplemental rules dealing with changes in the nature or scale of a trade, see CG47840+.

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.