Finance Act 2011

6 (1) Paragraph 7 (gains from which pre-entry losses are to be deductible) is amended as follows. U.K.

(2) In sub-paragraph (1), for paragraph (c) substitute—

“(c) on the disposal of any asset in respect of which the conditions in sub-paragraph (1A) are met.”

(3) After that sub-paragraph insert—

“(1A) The conditions referred to in sub-paragraph (1)(c) are—

(a) that the asset was acquired, on or after the entry date, by—

(i) the company to which the pre-entry loss accrued (“company A”), or

(ii) a company which, at the time of the acquisition, was a group company of company A,

from a person who at the time of the acquisition was not a group company of company A, and

(b) that the asset has not, since its acquisition from that person, been used or held for any purposes other than those of a trade or business which—

(i) was being carried on by company A immediately before the entry date, and

(ii) continued until the disposal to be carried on by company A or a company which, when it carried on the trade or business, was a group company of company A.

(1B) For the purposes of sub-paragraph (1A), a company is a “group company of company A” at any time when it is a member of a group of companies of which company A is also a member.

(1C) Where a company, having become a member of the relevant group, subsequently becomes a member of another group ( “ the new group ”)—

(a) sub-paragraph (1) continues to have effect, in relation to any loss which accrued to the company before it became a member of the relevant group, by reference to the date on which it became such a member, and

(b) accordingly, that sub-paragraph does not apply separately in relation to the loss by reason of it also having accrued to the company before it became a member of the new group.”

(4) Omit sub-paragraph (2).

(5) In sub-paragraph (3)—

(a) omit “, without prejudice to paragraph 9 below”,

(b) omit paragraph (b), and

(c) in paragraph (c), for “sub-paragraphs (1)(c) and (2)(c)” substitute “ sub-paragraph (1A) ”.

(6) For sub-paragraph (4) substitute—

“(4) Sub-paragraphs (4A) and (4B) apply for determining for the purposes of this paragraph whether an asset on the disposal of which a chargeable gain accrues was an asset held by a company immediately before the entry date (a “pre-entry asset”).

(4A) Except as provided by sub-paragraph (4B), an asset is not a pre-entry asset if—

(a) the company which held the asset at the entry date is not the company which makes the disposal, and

(b) since the entry date that asset has been disposed of otherwise than by a disposal to which section 171 applies.

(4B) Without prejudice to sub-paragraph (4C), where, on a disposal to which section 171 does not apply—

(a) an asset would cease to be a pre-entry asset by virtue of sub-paragraph (4A), but

(b) the company making the disposal retains an interest in or over the asset in question,

that interest is a pre-entry asset.

(4C) For the purposes of this paragraph—

(a) an asset acquired or held by a company at any time and an asset held at a later time by that company, or by any company which is or has been a member of the same group of companies as that company, is to be treated as the same asset if the value of the second asset is derived in whole or in part from the first asset, and

(b) if—

(i) any asset is treated (whether by virtue of paragraph (a) or otherwise) as the same as an asset held by a company at a later time, and

(ii) the first asset would have been a pre-entry asset in relation to that company,

the second asset is also to be treated as a pre-entry asset in relation to that company;

and paragraph (a) applies, in particular, where the second asset is a freehold and the first asset is a leasehold the lessee of which acquires the reversion.”

(7) In sub-paragraph (5) omit “or (2)” (in both places).

(8) In sub-paragraph (6) omit “or (2)”.