CG47664 - Restrictions: pre-entry loss: time-apportionment: additional consideration
Paragraph 2 of Schedule 7A to the Taxation of Chargeable Gains Act (TCGA) 1992
There is a special rule in for cases where additional consideration is provided on a reorganisation, for example a rights issue. Where any asset (the second asset) is treated by as the same as another asset (the first asset) previously held by any company, the rules apply.
- as if the consideration given for the acquisition of the second asset had been incurred at the same time as the consideration for the acquisition of the first asset
- where there is more than one such time, as if the consideration for the acquisition of the second asset had been incurred at those different times in the same proportions as the consideration for the acquisition of the first asset.
Example
In 1990, company LV acquires 0.2M shares in company A for £3M.
In 1991, LV leaves the L group and joins the M group.
In 1995, LV acquires a further 0.3M shares in company A for £1.5M.
In 1998, A makes a rights issue on a 1:5 basis at £6 per share. LV acquires 0.1M rights issue shares for £0.6M.
For time-apportionment purposes, LV's total holding of 0.6M shares is treated as acquired
0.24M shares in 1990 for £3.4M
0.36M shares in 1995 for £1.7M
Note: Additional rules relating to loss buying were enacted in the . See CG47020+ for guidance on the rules which apply in priority to for accounting periods ending on or after 5 December 2005.
and greatly simplified the rules in for the deduction of losses on or after 19 July 2011. See CG47400+ for guidance on loss streaming from that date.
can have the effect of treating a loss attributable to the post-entry period as a pre-entry loss, for example where the pre-entry cost is low in relation to additional consideration given on a post-entry reorganisation. But in this type of case the company concerned can elect under to compute the pre-entry loss by reference to the asset's market value at the time of entry into the group, see CG47720+.
Note: Additional rules relating to loss buying were enacted in . See CG47020+ for guidance on the rules which apply in priority to for accounting periods ending on or after 5 December 2005.
and greatly simplified the rules in for the deduction of losses on or after 19 July 2011. See CG47400+ for guidance on loss streaming from that date.