Pre-entry losses

Pre-entry losses

On 29 May 2001 company T acquired a group of companies D which included the appellant companies. The appellant companies had incurred capital losses. In their tax returns for the period 1 April 2001 to 31 March 2002 they sought to set off the losses against chargeable gains made another company in the group A on the disposal of assets between May 2001 and March 2002.
HMRC amended the returns saying that the losses were pre-entry losses and could not be offset against the gains under TCGA 1992 Sch 7A. The companies appealed.
The Special Commissioner said that Sch 7A is based on the notion that a pre-entry loss in relation to a company is any allowable loss that accrues to that company before it becomes a member of the group. Section 170(10) creates a problem however. The draftsman had to distinguish...