Schedule 7AA TCGA 1992: restrictions on capital losses: example
All the transactions take place in the same accounting period.
GV has allowable losses brought forward of £1M.
1 January: GV makes a loss of £2M.
1 March: GV makes a gain of £12M.
1 April: GV dividends all available reserves to its parent under a group election.
1 June: GV, with its subsidiaries GW and GY, joins the group headed by L.
2 June: GV acquires valueless asset p from fellow group member LB.
3 June: GV acquires worthless asset q from GW. GW has held asset q since before 1 January.
4 June: GV submits negligible value claims under Section 24(2) TCGA 1992 in respect of assets p and q. The loss shown on asset p is £7M and the loss on asset q is £3M.
There are no other capital transactions in the accounting period.
GV’s adjusted pre-entry gain is as follows:
|gain period (pre-entry)||2M|
|Adjusted pre-entry gain||6M|
|Gains of accounting period||6M|
The loss of £7M on asset p is not a qualifying loss and cannot be set against the pre-entry gain. It is therefore available to carry forward to set against gains of later accounting periods subject to the normal rules, including TCGA92/SCH7A.
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.