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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Gains from which pre-entry losses are deductible: change in trade

The restriction in paragraph 8 applies in the following cases.

  • Within a three year period before or after a company becomes a member of a group there is a major change in the nature or conduct of the trade carried on by the company.
  • A company joins a group after the scale of its trading activities has become small or negligible, and before any considerable revival of the trade.

Where either of these conditions applies, the trade is disregarded for the purposes of paragraph 7(1)(c) and (2)(c) in relation to any time before the company joined the group.

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.