Taxes Consolidation Act 1997 section 626A

Restriction on set-offs of pre-entry losses

Section 626A provides that Schedule 18A, which restricts the use of pre-entry capital losses within a group of companies, applies for the purposes of Part 20 (capital gains for companies).

• Schedule 18A applies where a company joins a chargeable gains group while carrying unused capital losses, or where it holds assets with inherent losses at the time it joins the group.
• The schedule restricts the extent to which those pre-entry losses can be set against gains accruing to the company or other group members after the company has joined the group.
• The provision is an anti-avoidance measure designed to counteract "loss-buying", where a group acquires a company primarily to use its capital losses to shelter the group's chargeable gains.
• A parallel provision in section 401 counteracts the buying of losses for income tax and corporation tax purposes.