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HMRC internal manual

Capital Gains Manual

Deduction of pre-entry losses: general

There may be cases where more than one pre-entry loss can be deducted from a gain, but the gain is not large enough to absorb all the pre-entry losses. It may then be necessary to establish which amounts of which particular pre-entry losses are deducted from the gain, in order to apply the paragraph 7 Schedule 7A rules in a later period to which any part of a pre-entry loss is carried forward. It is also necessary to identify which particular losses have been deducted from which particular gains in cases where a company joining a group on or after 1 April 1987 brings losses or loss assets into the group, and there are losses which were carried forward to an accounting period ending on or after 16 March 1993. You have to establish what pre-entry losses are included in the allowable losses carried forward to this later accounting period. For all these cases there are supplementary rules in paragraph 6(2)-(4) Schedule 7A giving the order of set-off.

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.