Commentary

D2.428 Relief for pre-entry loss—Connected groups

Corporate tax
Corporate tax | Commentary

D2.428 Relief for pre-entry loss—Connected groups

Corporate tax | Commentary

D2.428 Relief for pre-entry loss—Connected groups

The rules in this article were repealed in relation to the set off of pre-entry losses on or after 19 July 2011, subject to transitional rules (see D2.414). Prior to 19 July 2011, the rules in this article applied only where the loss buying rules (D2.402–D2.406) did not apply (ie where there was no arrangement for avoiding tax, eg on a merger or takeover).

If there are two or more groups to which the pre-entry loss provisions apply (ie two or more groups that fall within Categories 1–5 (D2.411)), those groups are called connected groups1.

Special rules apply to prevent advantage being taken of the use of connected groups in relation to a loss as follows2:

  1.  

    (a)     The capital loss restrictions apply separately to each of the connected groups for the purpose of:

    1.  

      –     determining whether the loss on disposal of an asset is a loss on disposal of a pre-entry asset (as defined in D2.417), and

    2.  

      –     calculating the pre-entry proportion of that loss (as defined in

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