In this week’s Q&A, Rickie Lowery CTA, tax adviser at Croner-i VIP Tax Team, explains the tax reliefs available if the value of shares collapse and business goes bust
My individual client subscribed £300,000 for shares in an unquoted trading company in 2020. Unfortunately, the company has since become insolvent, meaning the client’s shares are now effectively worthless. His only income is from employment, amounting to £90,000 for the current tax year.
Is it correct that the client can claim a capital loss without disposing of the shares and that this loss can potentially be set against his income, rather than his gains?
It is possible to generate a loss for capital gains tax purposes in situations where the shares have not actually been disposed of. The mechanism for this is via a ‘negligible value claim’ and is made via s24(1A) TCGA 1992.
Importantly, the asset must have become of negligible value since it was acquired by the taxpayer, so it is important to establish that it had a non-negligible value when it was acquired; this appears to be the case for your client.
