Taxation of Chargeable Gains Act 1992 Schedule 7AA paragraph 2

Restriction on setting off losses

Paragraph 2 of Schedule 7AA restricts the ability to set capital losses against chargeable gains that arise on certain company reorganisations and share exchanges, preventing losses from being used to reduce or eliminate gains that benefit from the no-gain/no-loss treatment under the schedule.

• Where a chargeable gain arises on a transaction covered by Schedule 7AA, capital losses (whether brought forward from earlier periods or arising in the same period) cannot be set against that gain.
• The restriction applies to losses that would otherwise be available for offset under the normal capital gains loss relief rules.
• This prevents companies from sheltering gains on share-for-share exchanges and similar reorganisations by matching them with unrelated capital losses.
• The provision was amended by Finance Act 2006, which refined the scope of the loss-streaming restrictions in the context of corporate reorganisations.