Taxation of Chargeable Gains Act 1992 Schedule 7AA paragraph 3

Adjustment of pre-entry gains

Paragraph 3 of Schedule 7AA deals with how chargeable gains that arose before a company joined a group are adjusted when calculating the overall gain or loss of the group for the purposes of the de-grouping charge provisions.

• When a company joins a group, any chargeable gains it accrued before joining (known as "pre-entry gains") must be identified and ring-fenced so they cannot be sheltered by losses of the existing group members.
• The adjustment mechanism ensures that pre-entry gains are calculated by reference to the market value of assets at the date the company joined the group, preventing artificial inflation or deflation of gains within the group structure.
• Where a company leaves the group and a de-grouping charge arises, the pre-entry gain element is separated out and attributed back to the departing company, rather than being set against other group members' losses.
• These provisions were amended by Finance Act 2006 to align with wider reforms to the de-grouping charge rules, ensuring consistency in the treatment of pre-entry gains across corporate group transactions.

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