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HMRC internal manual

Capital Gains Manual

Schedule 7AA TCGA 1992: restrictions on capital losses: outline summary

Schedule 7AA applies to the accounting period in which a company (`the relevant company’) joins a group and restricts the losses which the relevant company can set against any gains it realised before joining that group. The only losses available against such gains are losses realised before the company joined the group in question and losses realised after that time on assets which the company held before joining the group. There are special rules covering the situation where a number of companies leave one group together to join another. Broadly, gains and losses which could have been brought together in the old group can continue to be brought together in the new group, see CG48202-CG48210. There are also special rules for pooled assets, see CG48211-CG48221, and assets acquired at different times, see CG48222-CG48223. In general terms, the rules restrict the available loss to that which would have accrued on the asset actually held immediately before the company joined the group. The legislation contains no motive test and applies mechanically wherever the necessary conditions are satisfied.

Note: New rules relating to gain buying were enacted in FA 2006. See CG47320+ for guidance on the rules which apply for accounting periods ending on or after 5 December 2005.