Worthless shares may still have value
Do not despair if you find yourself in possession of worthless shares – there is tax relief available to you.
Negligible value claim
You can submit a negligible value claim if the company has not been wound-up. This creates a deemed capital loss in your hands, equal to the amount you paid for the shares.
You can set this loss against gains arising in either of the two tax years ending before the year of the claim, if the shares were worthless at that date. But if you currently pay capital gains tax (CGT) at 28% the loss will be worth more in this year than in an earlier year, when CGT was just 18%. Once the company is dissolved you are deemed to have disposed of your shares so the negligible value claim is unnecessary.
Income tax loss claim
Once you have established a capital loss as above, you could claim to have that loss set against your income for the current or previous tax year. However, this share loss relief claim has the following pre-conditions:
The shares must issued by an unquoted trading company or under the Enterprise Investment Scheme (EIS); and
You must have subscribed for the shares, or acquired them from your subscriber spouse or civil partner.
HM Revenue & Customs previously refused claims where unquoted shares were subscribed for in joint names or by a nominee, but not if the shares were EIS shares. From 11 October 2010, HMRC decided to accept claims for share loss relief relating to unquoted shares from joint or nominee subscribers.
Any such claims that are under enquiry will be reconsidered in light of this new practice. The deadline for submitting claims relating to a share loss arising in 2009/10 is 31 January 2012.
Before you launch a new claim for share loss relief, talk it through with us first, as there a number of other factors that could scupper such a loss claim.