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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) (b)

If a company holds an asset at the relevant time (see CG47567), and the allowable loss on a later disposal of the asset by that or another group company has a pre-entry proportion, the pre-entry loss can be deducted from a gain accruing to the company to which the loss accrues, provided the following condition is satisfied. This is that the gain asset and the loss asset were each held by the same company at the relevant time. But see CG47800+ concerning the case where there are post-entry additions to a gain asset held at the relevant time.


On 1 January 2001

  • Company LV joins the L group, or
  • LV, already a member of the L group, becomes UK resident, or
  • LV, already a non-UK resident member of the L group, introduces the shares to its UK branch.

(Any of these three occurrences is the relevant time for the purposes of Schedule 7A, see CG47567, so in all cases the shares held by LV at this time would be pre-entry assets, and the computation below would be the same.)

On 1 January 2001 LV holds asset A which it sells at a loss £4M (pre-entry proportion of loss £3M), and asset B which it later sells at a gain £6M.

The pre-entry proportion £3M of the loss can be deducted from the gain £6M. So can the remainder of the loss £1M (total loss £4M less pre-entry proportion £3M), unless other pre-entry losses are deducted in priority under paragraph 6(1)(a) Schedule 7A, see CG47782.

The pre-entry loss is also deductible from the gain if both the loss asset A and the gain asset B are transferred within the L group at no gain/no loss to the same company, say LW. If LW realises a loss £4M on asset A (pre-entry proportion £3M) and a gain £6M on asset B, LW can deduct the pre-entry proportion of the loss from the gain. LW can also deduct the remainder £1M of the allowable loss, unless other pre-entry losses are 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.