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HMRC internal manual

Capital Gains Manual

Gains from which pre-entry losses are deductible: pre-entry assets

TCGA92/SCH7A/PARA7 (2) (a)

If a company brings an asset into a group, and an allowable loss on a later disposal by that company has a pre-entry proportion, the pre-entry loss can be deducted from a gain which accrued to the company on a disposal before it joined the group.


The loss vehicle LV has a calendar year accounting period. All companies are resident in the UK.

On 1 January 1995, LV disposes of an asset and realises a gain £6M.

On 1 July 1995, LV leaves the L group and joins the M group. LV brings an asset into the M group which it sells at a loss £5M on 1 October 1995. The pre-entry proportion of the loss is £4M.

In the computation for the accounting period to 31 December 1995, the pre-entry loss £4M can be deducted from the pre-entry realised gain £6M without restriction. The remainder £1M of the allowable loss is also deductible from the gain, subject to any other pre-entry losses being deducted in priority under paragraph 6(1)(a) Schedule 7A, see CG47882.

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.