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HMRC internal manual

Capital Gains Manual

Appropriations to trading stock

An extension of these rules in TCGA92/S173, see CG45900, covers the case where one group company, which does not hold an asset as trading stock, transfers it to another group company, which does hold the asset as trading stock. The asset goes from the transferor to the transferee at no gain/no loss under TCGA92/S171, see CG45300+, and the transferee is treated as having appropriated the asset to trading stock. The effect of any election under Section 161(3) is to roll over the transferee’s chargeable gain or allowable loss on the appropriation (attributable to the period of ownership by the transferor) into the Case I computation of the transferee.

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.

It is not possible to make a section 161(3) election in respect of a loss where the appropriation took place on or after 8 March 2017.