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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Gains on assets held on entry into a group: qualifying corporate bonds


The special rule in paragraph 7(6) Schedule 7A allows a pre-entry loss to be set off against a gain accruing on the disposal of qualifying corporate bonds (QCBs), if the QCBs were acquired, in respect of pre-entry assets, on a post-entry reorganisation. Paragraph 7(1)(b) and (2)(b) allow pre-entry losses to be set against gains brought into the group at the same time as the loss or the loss asset. But, in the absence of a special rule, QCBs acquired on a post-entry reorganisation would not themselves be assets held before group entry, even where the gain latent in the QCBs does represent a gain on pre-entry assets. There is a deeming rule which achieves this result in paragraph 7(6) Schedule 7A. Detailed instructions on the QCB provisions are at CG53709+.

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.