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HMRC internal manual

Capital Gains Manual

Groups to which loss set-off restrictions apply: special cases

The capital gains group definition is in TCGA92/S170. A group comprises a principal company and all its 75 per cent subsidiaries in terms of ordinary share capital, together with their 75 per cent subsidiaries and so on, see CG45170. But a subsidiary can only be a group member if it is also an `effective 51 per cent subsidiary’ of the principal company, see CG45180. This means that the principal company must have a beneficial entitlement (either direct or indirect) to more than 50 per cent of the subsidiary’s profits and assets.

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.