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Triggering capital loss on shares

Client company is insolvent.  The company is not yet in liquidation but soon will be.  He has shares he paid £50k for and a Director's Loan Account balance of £45K.  It is unlikely he will get anything back out of the company as secured creditors and very little in assets.  At what point can he claim a capital loss on the shares and DLA?  Is it feasible for this claim to be made in 2011/2012 if the company was declared insolvent (which it was) before 5/4/2012?

thanks for your assistance.

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Yes

You can make a negligible value claim (under S.24 TCGA 1992) once the shares have become of negligible value (although you may need to be able to demonstrate this).  You can make a neglible value claim in respect of the preceding two year.  If the shares were demonstrably of negligible value then, you could even make the claim in respect of 2010/11.

As I have said, the shares need to have become of negligible value.  I assume when the £50K was paid, the shares were worth that.

If the shares were acquired by subscription and the company is an unquoted trading company, Income Tax relief may be obtainable for the capital loss arising from the neglible value claim.

If your client can also demonstrate that the loan funding has become irrecoverable and that it was used for the purposes of the company's trade, he can make a claim for a capital loss in respect of the loan under S.253 TCGA 1992 (loans to traders).  There is no provision to claim this loss against income though.

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