D2.427 Relief for pre-entry loss—Group members joining another group at the same time
The rules in this article apply only where the loss buying rules (D2.402–D2.406) do not apply. As a result, for accounting periods ending after 4 December 2005, the following provisions will normally only apply in cases where there is no arrangement for avoiding tax, eg on a merger or takeover.
Relief is available where two or more companies become members of a group (Group B) at the same time and they were all members of another group (Group A) immediately before they joined Group B1.
Where the relief applies, the basic set-off restrictions (see D2.425) and the relief for trade assets (see D2.426) are modified as set out below. These modifications preserve to some extent the previous ability of the former members of the first group, whilst members of that group, to set capital losses against capital gains by transfer of assets between them within the first group.
In all cases where this relief operates, it is subject to possible further restriction under the rules which apply where there are two or more connected groups in relation to a loss accruing on a particular disposal (see D2.428).
Relaxation of set-off restrictions
Where companies join the second group at the same time (and they were all members of the first group), they are all deemed to hold each other's assets for the purposes of the pre-entry loss restrictions as required2. It is important to note that the deeming of an asset to