CG47840 | Gains from which pre-entry losses are deductible: change in trade

TCGA92/SCH7A/PARA8

The rules in paragraph 7(1)(c) and (2)(c) Schedule 7A permit pre-entry losses to be deducted from gains on assets acquired from persons outside the relevant group and used for the purposes of a pre-entry trade. The provisions of paragraph 8 Schedule 7A prevent exploitation of the trade asset rules in cases where a group acquires a trading company with realised losses or loss assets, and there is a major change in the nature or conduct of the trade. Or where a group acquires a company with a near-dormant trade which is then revived.

Note: Additional rules relating to loss buying were enacted in FA 2006. See CG47020+ for guidance on the rules which apply in priority to TCGA92/SCH7A for accounting periods ending on or after 5 December 2005.

FA11/S46 and FA11/SCH11 greatly simplified the rules in TCGA92/SCH7A for the deduction of losses on or after 19 July 2011. See CG47400+ for guidance on loss streaming from that date.

A major change in the nature or conduct of a trade includes

• a major change in the type of property dealt in, or the services or facilities provided, or

• a major change in customers, markets or outlets.

A major change may result from a gradual process beginning outside the three year period.

Note: Additional rules relating to loss buying were enacted in FA 2006. See CG47020+ for guidance on the rules which apply in priority to TCGA92/SCH7A for accounting periods ending on or after 5 December 2005.

FA11/S46 and FA11/SCH11 greatly simplified the rules in TCGA92/SCH7A for the deduction of losses on or after 19 July 2011. See CG47400+ for guidance on loss streaming from that date.