The rules in this article apply only where the loss buying rules (¶Ù2.402–D2.404) do not apply. They normally only apply in cases where there is no arrangement for avoiding tax, eg on a merger or takeover.
The restriction on the deduction of pre-entry losses (see D2.425) is relaxed for gains arising on assets which have been acquired for trade or business purposes1 . This relaxation is specifically excluded when there is a major change in the nature or conduct of the trade of the company realising the pre-entry loss.
The modification of these rules where two or more members of a group join another group at the same time is covered in D2.427.
Scope of the relief
A pre-entry loss can, in addition to the set-off rules described at D2.425, be deducted from a gain arising on the disposal by the company joining the group of an asset which was both2:
- Ìý
•ÌýÌýÌýÌý acquired by that company, on or after the date on which it became a member of
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