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HMRC internal manual

Capital Gains Manual

Schedule 7AA TCGA 1992: restrictions on capital losses: notional net pre-entry loss

It is first necessary to determine the notional net pre-entry loss. In order to do this you

  • pre-entry securities

    • identify the pool of securities held by the company at the time it joined the group (these are called `pre-entry securities’; if a company joins more than one group in an accounting period this pool is frozen as it was when the company joined the first group, but see CG48221 where several companies join the group together)
    • match post-entry disposals from the pooled asset in the gain period with the identified pool of pre-entry securities until the pool of pre-entry securities is exhausted
    • compute the gain or loss which would have arisen on each post-entry disposal when matched in this way
    • aggregate the results of the computations for all post-entry disposals matched against the pool of pre-entry securities to arrive at the figure of notional net pre-entry loss.

If the result of the above calculation is an excess of gains over losses, the net notional pre-entry loss is zero. Otherwise, it is the amount by which losses exceed gains.

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.