Taxation of Chargeable Gains Act 1992 Schedule 7A paragraph 8

Change of a company's nature

Section 8 of Schedule 7A prevents a company from using pre-entry losses against certain gains where there has been a major change in the nature or conduct of its trade or business around the time it joins a group, or where its trade or business had become near-dormant before joining and is later revived.

• If a company joins a group and, within a three-year window either side of joining, there is a major change in the nature or conduct of its trade or business, the pre-joining trade or business is disregarded when determining whether pre-entry losses can be set against gains under paragraph 7(1A).
• Similarly, if a company's trade or business had become small or negligible before it joined the group, and there has been no considerable revival before joining, that trade or business is also disregarded for the same purposes.
• A major change includes significant shifts in the type of property dealt in, services or facilities provided, customers, markets or outlets, or — for investment companies — the nature of investments held, even if the change resulted from a gradual process that started outside the three-year window.
• Where the application of this rule depends on events occurring after the company joins the group (but within three years of joining), HMRC may raise an assessment within six years of the relevant event without it being out of time.