The general rule is that a restricted loss can be set off against a gain on an asset held by a company with restricted losses at the time it joined the group. Where the capital gains rules treat a collection of assets as a single asset then a special rule is needed to deal with the situation of the asset being ‘added to’ after the company joins the group. The following example illustrates why.

In 2012, company L was acquired by the M group leading to its accrued loss of £12 million becoming restricted. At that time it held 1,000 shares in Y plc.

M also owned one million shares in Y plc showing a substantial unrealised gain.

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