Section 46
1U.K.In section 177A of TCGA 1992 (restriction on set-off of pre-entry losses), omit “and losses accruing on assets held by any company at such a time”.
2U.K.Schedule 7A to that Act (restriction on set-off of pre-entry losses) is amended as follows.
3(1)Paragraph 1 (application and construction of Schedule) is amended as follows.U.K.
(2)In sub-paragraph (1) for “is or has been” substitute “ becomes ”.
(3)For sub-paragraph (2) substitute—
“(2)In this Schedule “pre-entry loss”, in relation to any company, means any allowable loss that accrued to that company at a time before it became a member of the relevant group.”
(4)Omit sub-paragraphs (3), (3A), (4) and (5).
(5)In sub-paragraph (6) for “Subject to” to “if” substitute “ If ”.
(6)Omit sub-paragraph (8).
4U.K.Omit paragraphs 2 to 5 (determination of pre-entry proportion of losses on pre-entry assets).
5(1)Paragraph 6 (restrictions on the deduction of pre-entry losses) is amended as follows.U.K.
(2)In sub-paragraph (2)—
(a)omit paragraph (a) (and the “and” after it), and
(b)in paragraph (b), omit “in any other case”.
(3)In sub-paragraph (3)—
(a)omit paragraph (a) (and the “and” after it), and
(b)in paragraph (b), omit “in the case of an election under sub-paragraph (2)(b) above,”.
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)”.
7(1)Paragraph 8 (change of a company's nature) is amended as follows.U.K.
(2)In sub-paragraph (1)—
(a)after “trade” (in each place) insert “ or business ”,
(b)in paragraph (a) for “carried on by that company” substitute “ which was carried on by that company immediately before it became a member of that group ”, and
(c)for “paragraph 7(1)(c) and (2)(c)” substitute “ paragraph 7(1A) ”.
(3)For sub-paragraph (2) substitute—
“(2)In sub-paragraph (1) “a major change in the nature or conduct of a trade or business” includes—
(a)a major change in the type of property dealt in, or services or facilities provided, in the trade or business,
(b)a major change in customers, markets or outlets of the trade or business, or
(c)in the case of a company with investment business (within the meaning of section 1218 of CTA 2009), a major change in the nature of the investments held;
and this paragraph applies even if the change is the result of a gradual process which began outside the period of three years mentioned in sub-paragraph (1)(a).”
8U.K.Omit paragraph 9 (identification of “the relevant group” and application of Schedule to every connected group).
9U.K.In paragraph 11 (continuity provisions), omit sub-paragraph (3)(b) (and the “and” before it).
10U.K.Omit the following provisions (which relate to the provisions repealed by paragraphs 1 to 9)—
(a)in FA 1994, sections 93(8) to (10) and 94;
(b)in FA 1998, section 138;
(c)in FA 2000, in Schedule 29, paragraph 7(2) to (5);
(d)in F(No.2)A 2005, section 65(2), (3) and (5).
11(1)The amendments made by this Part of this Schedule have effect on and after commencement in relation to the deduction of any pre-entry loss within paragraph 1(2) of Schedule 7A to TCGA 1992 (as substituted by paragraph 3 of this Schedule) regardless of—U.K.
(a)whether the loss accrued before or on or after commencement, and
(b)whether the company which accrued the loss became a member of the relevant group (within the meaning of that Schedule) before or on or after commencement.
(2)In this paragraph “commencement” means the day on which this Act is passed.
12(1)Sub-paragraph (2) applies where, immediately before commencement, Schedule 7A to TCGA 1992 had 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 a loss of that company within paragraph 1(2)(b) of that Schedule (pre-entry proportion of an allowable loss that has accrued to a company on the disposal of a pre-entry asset).U.K.
(2)On and after commencement that loss is to be treated, for the purposes of Schedule 7A to TCGA 1992, as if it were a pre-entry loss within the meaning of paragraph 1(2) of that Schedule (as substituted by paragraph 3 of this Schedule) which accrued to that company immediately before it became a member of the relevant group.
(3)In this paragraph “commencement” means the day on which this Act is passed.