Taxation of Chargeable Gains Act 1992

[F1 Application and construction of Schedule U.K.

Textual Amendments

F1 Sch. 7A inserted (27.7.1993 with effect as mentioned in s. 88(3) of the amending Act) by 1993 c. 34, c. 88(2), Sch. 8

1 (1) This Schedule shall have effect, in the case of a company which is or has been a member of a group of companies (“the relevant group”), in relation to any pre-entry losses of that company[F2 , but this Schedule shall have no effect in any case where section 184A (restrictions on buying losses: tax avoidance schemes) has effect in relation to those losses]. U.K.

(2) In this Schedule “pre-entry loss”, in relation to any company, means—

(a) any allowable loss that accrued to that company at a time before it became a member of the relevant group; or

(b) the pre-entry proportion of any allowable loss accruing to that company on the disposal of any pre-entry asset;

and for the purposes of this Schedule the pre-entry proportion of any loss shall be calculated in accordance with paragraphs 2 to 5 below.

(3) In this Schedule “pre-entry asset”, in relation to any disposal, means (subject to sub-paragraph (4) below) any asset which was held, at the time immediately before [F3 the relevant event occurred in relation to it], by any company (whether or not the one which makes the disposal) which is or has at any time been a member of [F4 the relevant group].

[F5 (3A) In this paragraph references to the relevant event occurring in relation to a company—

(a) in a case in which—

(i) the company was resident in the United Kingdom at the time when it became a member of the relevant group, or

(ii) the asset was a chargeable asset in relation to the company at that time,

are references to the company becoming a member of that group;

[F6 (aa) in a case in which (whether or not paragraph (a)(i) also applies)—

(i) the company is an SE resident in the United Kingdom, and

(ii) the asset was transferred to the SE as part of the process of its formation by the merger by acquisition of two or more companies in accordance with Articles 2(1) and 17(2)(a) or (b) of Council Regulation (EC) 2157/2001 on the Statute for a European Company (Societas Europaea),

are references to the asset becoming a chargeable asset in relation to the SE or, if at the time of the formation of the SE the asset was a chargeable asset in relation to a company which ceased to exist as part of the process of the formation of the SE, to the asset becoming a chargeable asset in relation to that company;]

(b) in any other case, are references to whichever is the first of—

(i) the company becoming resident in the United Kingdom, or

(ii) the asset becoming a chargeable asset in relation to the company.

For this purpose an asset is a “chargeable asset” in relation to a company at any time if, were the asset to be disposed of by the company at that time, any gain accruing to the company would be a chargeable gain and would by virtue of section [F7 10B] [F8 (or, if the company is an SE, by reason of the asset having been transferred to the SE on its formation)] form part of its chargeable profits for corporation tax purposes.]

(4) Subject to paragraph 3 below, an asset is not a pre-entry asset if—

(a) the company which held the asset at the time [F9 the relevant event occurred in relation to it] is not the company which makes the disposal; and

(b) since that time that asset has been disposed of otherwise than by a disposal to which section 171 applies;

but (without prejudice to sub-paragraph (8) below) where, on a disposal to which section 171 does not apply, any asset would cease to be a pre-entry asset by virtue of this sub-paragraph but the company making the disposal retains any interest in or over the asset in question, that interest shall be a pre-entry asset for the purposes of this Schedule.

(5) References in this Schedule, in relation to a pre-entry asset, to the relevant time are references to the time when [F10 the relevant event occurred in relation to the company by reference to which that asset is a pre-entry asset]; and for the purposes of this Schedule—

(a) where [F11 a relevant event has occurred in relation to a company] on more than one occasion, an asset is a pre-entry asset by reference to that company if it would be a pre-entry asset by reference to that company in respect of any one of those occasions; but

(b) references in the following provisions of this Schedule to the time when [F12 a relevant event occurred in relation to a company], in relation to assets held on more than one such occasion as is mentioned in paragraph (a) above, are references to the later or latest of those occasions.

(6) Subject to so much of sub-paragraph (6) of paragraph 9 below as requires groups of companies to be treated as separate groups for the purposes of that paragraph, if—

(a) the principal company of a group of companies (“the first group”) has at any time become a member of another group (“the second group”) so that the two groups are treated as the same by virtue of subsection (10) [F13 or (10A)] of section 170, and

(b) the second group, together in pursuance of that subsection with the first group, is the relevant group,

then, except where sub-paragraph (7) below applies, the members of the first group shall be treated for the purposes of this Schedule as having become members of the relevant group at that time, and not by virtue of that subsection at the times when they became members of the first group.

(7) This sub-paragraph applies where—

(a) the persons who immediately before the time when the principal company of the first group became a member of the second group owned the shares comprised in the issued share capital of the principal company of the first group are the same as the persons who, immediately after that time, owned the shares comprised in the issued share capital of the principal company of the relevant group; and

(b) the company which is the principal company of the relevant group immediately after that time—

(i) was not the principal company of any group immediately before that time; and

(ii) immediately after that time had assets consisting entirely, or almost entirely, of shares comprised in the issued share capital of the principal company of the first group.

(8) For the purposes of this Schedule, but subject to paragraph 3 below—

(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, shall 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) above 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 shall also be treated as a pre-entry asset in relation to that company;

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

(9) In determining for the purposes of this Schedule whether any allowable loss accruing to a company under section 116(10)(b) is a loss that accrued before the company became a member of the relevant group, any loss so accruing shall be deemed to have accrued at the time of the relevant transaction within the meaning of section 116(2).

(10) In determining for the purposes of this Schedule whether any allowable loss accruing to a company on a disposal under section 212 is a loss that accrued before the company became a member of the relevant group, the provisions of section 213 shall be disregarded.]

Textual Amendments

F2 Words in Sch. 7A para. 1(1) inserted (with effect in accordance with s. 70(6)-(8) of the amending Act) by Finance Act 2006 (c. 25), s. 70(3) (with s. 70(10)-(11))

F3 Words in Sch. 7A para. 1(3) substituted (with effect in accordance with Sch. 29 para. 7(6) of the amending Act) by Finance Act 2000 (c. 17), Sch. 29 para. 7(2)(a) (with Sch. 29 paras. 7(7)-(9), 46(5))

F4 Words in Sch. 7A para. 1(3) substituted (with effect in accordance with Sch. 29 para. 7(6) of the amending Act) by Finance Act 2000 (c. 17), Sch. 29 para. 7(2)(b) (with Sch. 29 paras. 7(7)-(9), 46(5))

F5 Sch. 7A para. 1(3A) inserted (with effect in accordance with Sch. 29 para. 7(6) of the amending Act) by Finance Act 2000 (c. 17), Sch. 29 para. 7(3) (with Sch. 29 paras. 7(7)-(9), 46(5))

F6 Sch. 7A para. 1(3A)(aa) inserted (with effect in accordance with s. 65(6) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), s. 65(2)

F7 Word in Sch. 7A para. 1(3A) substituted (with effect in accordance with s. 155(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 27 para. 2(3)

F8 Words in Sch. 7A para. 1(3A) inserted (with effect in accordance with s. 65(6) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), s. 65(3)

F9 Words in Sch. 7A para. 1(4)(a) substituted (with effect in accordance with Sch. 29 para. 7(6) of the amending Act) by Finance Act 2000 (c. 17), Sch. 29 para. 7(4) (with Sch. 29 paras. 7(7)-(9), 46(5))

F10 Words in Sch. 7A para. 1(5) substituted (with effect in accordance with Sch. 29 para. 7(6) of the amending Act) by Finance Act 2000 (c. 17), Sch. 29 para. 7(5)(a) (with Sch. 29 paras. 7(7)-(9), 46(5))

F11 Words in Sch. 7A para. 1(5)(a) substituted (with effect in accordance with Sch. 29 para. 7(6) of the amending Act) by Finance Act 2000 (c. 17), Sch. 29 para. 7(5)(b) (with Sch. 29 paras. 7(7)-(9), 46(5))

F12 Words in Sch. 7A para. 1(5)(b) substituted (with effect in accordance with Sch. 29 para. 7(6) of the amending Act) by Finance Act 2000 (c. 17), Sch. 29 para. 7(5)(c) (with Sch. 29 paras. 7(7)-(9), 46(5))

F13 Words in Sch. 7A para. 1(6)(a) inserted (with effect in accordance with s. 65(6) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), s. 65(4)