Tax on capital gains and pre-entry loss rules

The taxpayer undertook a series of transactions intended to enable it to offset the capital gains of companies in the O&H group against the losses of companies in the ANO group. Had the O&H group acquired the ANO group TCGA 1992 Sch 7A (restriction on set-off of pre-entry losses) would have applied to restrict the use of ANO group’s losses but that was not the case if the ANO group acquired the O&H group.

However a new holding company SSG was inserted above the ANO group before the acquisition of the O&H group. Sch 7A para 1(7) has the effect that if two conditions are satisfied the group headed by the new holding company is treated as the same as the ANO group. In this instance if para 1(7) applied the use of ANO’s losses against O&H’s gains would not be restricted...