Taxation of Chargeable Gains Act 1992 Schedule 7A paragraph 7

Gains from which pre-entry losses are to be deductible

Section 7 of Schedule 7A sets out the rules governing which chargeable gains a company's pre-entry losses (losses that arose before it joined a group) may be offset against, and how assets are traced for this purpose.

• Pre-entry losses may only be set against gains on disposals made before the company joined the group, gains on assets the company already held when it joined, or gains on assets acquired from outside the group and used solely for a trade the company was carrying on at the date it joined
• Once a loss becomes restricted as a pre-entry loss in relation to a particular group, that restriction is permanent — even if the company later moves to a new group
• Where two or more companies leave one group together and join a new group at the same time, assets held or acquired by any of those companies can be treated as held or acquired by the company with the pre-entry loss
• Special tracing rules apply to pooled assets, assets whose value derives from earlier assets, retained interests, and qualifying corporate bonds acquired on a reorganisation in exchange for pre-entry assets