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HMRC internal manual

Capital Gains Manual

Groups to which loss set-off restrictions apply: connected groups

The rules ring-fencing the gains from which pre-entry losses are deductible are in paragraph 7 Schedule 7A, see CG47770+. If a loss on the disposal of an asset is a pre-entry loss in relation to two or more connected groups, and the result of applying Schedule 7A separately to any of the connected groups is that the amount of the loss deductible from a particular gain is nil, then no part of the loss can be deducted from that gain.

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.