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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) (c)

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 conditions are satisfied.

  • The company which held the loss asset at the relevant time (the initial company) acquired the gain asset from a person who was not a group member at the time of acquisition, and
  • since the acquisition of the gain asset from outside the group, it has been used or held exclusively for the purposes of a trade which the initial company carried on before the relevant time, 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.