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HMRC internal manual

Capital Gains Manual

Restrictions on setting off capital losses: privatisations

If a realised capital loss, which has accrued to a company transferring assets and liabilities in a privatisation scheme, is treated as an allowable capital loss of the transferee company, the loss is not a pre-entry loss of the transferee for the purposes of TCGA92/SCH7A (paragraph 11(2) Schedule 7A). The capital gains code generally does not permit one company to benefit from another company’s realised losses. But there are privatisation provisions which have this effect, for example, paragraph 4 Schedule 17 F(No.2)A 1992 dealing with Northern Ireland Electricity.

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.