Capital gains tax: negligible value claims
In these circumstances, a negligible value claim may work to your advantage. The claim allows you to crystallise a capital loss and use it against other capital gains, or potentially against an income tax liability.
How it works
‘Negligible value’ is not defined in statute, but HMRC interprets it as meaning ‘next to nothing’, and the claim means you are treated as having sold an asset, and then immediately reacquired it at the time of the claim, for the value specified in the claim. That value will usually be nil. To make a claim, the asset must, however, have become of negligible value since you acquired it: a claim cannot be made on an asset worth nothing when it was acquired.
It is possible to specify an earlier date in the claim, potentially giving a more elastic timeframe. The provision can thus have effect for up to two years before the start of the tax year in which the claim is made. To make such a retrospective claim, the asset must have been owned at the earlier specified time, and have become of negligible value on, or by, the earlier specified time.
There are strict conditions to be aware of. The asset must still be in your ownership at the date of the claim. If the company has been dissolved, you are automatically treated as having made a disposal of the shares at the time of dissolution. In consequence, you cannot make a negligible value claim on or after the date a company has been dissolved, since you no longer own the shares. All of this means that the timing of claims is particularly important.
Where you want to make a claim for shares and securities for a company in liquidation or receivership, there is specific information HMRC will require to consider the claim, and we can advise further here. HMRC maintains on gov.uk a list of shares and securities in companies previously quoted on the London Stock Exchange that it accepts as being of negligible value. Note however, that a claim is still required even if your shares are on the list. There is no published list for unquoted companies, companies formerly quoted on the Alternative Investment Market and PLUS Market, or non-UK companies.
Here to help
Claims are made either via the tax return, or by writing to HMRC. We would strongly recommend discussion in advance of the end of the tax year, in view of the importance of timing and the possibility of backdating claims. We are always on hand to provide in depth advice on the optimal approach to any capital loss, whether for an individual or a company.
