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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)

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 brings an asset into a group, and an 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 one or other of the joining companies immediately before they joined the group. But see CG47800+ concerning the case where there are post-entry additions to a gain asset held at the time of entry.


Companies LV, LW and LX together leave the L group and join the M group. LV holds asset A which is later disposed of at a loss. LX holds asset B which is disposed of at a gain. Depending on the pattern of no gain/no loss transfers within the M group, the loss on asset A and the gain on asset B may both be crystallised in LV or LW or LX. In any of these situations the pre-entry proportion of the loss on asset A is deductible from a gain on asset B accruing in the same accounting period as the loss or subsequently.

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.