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

  • The asset was acquired by another of the joining companies on or after the entry date 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 company bringing the realised loss into the group carried on before entry, 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.