The rules in this article apply only where the loss buying rules (¶Ù2.402–D2.406) do not apply. This is normally cases where there is no arrangement for avoiding tax, eg on a merger or takeover.
Appropriations to stock in trade
Where a capital asset is appropriated to trading stock there is a deemed disposal at market value1. In the case of a company which joins a group of companies after such an appropriation, any capital loss on the deemed disposal would, of course, be a pre-entry loss in relation to that group of companies.
Where the appropriation took place before 8 March 2017, it was possible for an election to be made that the resultant gain or loss (providing it is not an ATED-related gain (C2.1125)2) be instead taken into account when computing the trading profit or loss3 (see C3.801). Such an election would have the effect of making any pre-entry loss 'disappear' as the capital loss which would have accrued on the deemed disposal is effectively treated as an additional deduction
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