Loss on Value of Shares & Director's Loan to the Company

Loss on Value of Shares & Director's Loan to...

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Hi,

I have a couple of questions regarding self assessment returns

1. If one has shares in a company and the shares have lost the value. Can the person set off this loss to his/her self assessment return?

2. If a director has made a loan to the company and the company cease to trade or is not in position to pay his/her loan back, can the director set off this loan in his/her self assessment return?

Much Obliged...

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By pawncob
22nd Aug 2013 12:30

Maybe

"Lost value" has little meaning. Have they been sold?Has the company gone into liquidation/receivership?

If the shares are on HMRC's Nil Value list then you can claim a capital loss, which you can also do if you can prove they had irretrievably ceased to have any value.

Same applies to Directors' Loans.

 

Note these losses are CAPITAL losses used against CGT.

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By User deleted
22nd Aug 2013 12:36

@pawncob

ITA 2007 s131?

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By pawncob
22nd Aug 2013 14:26

Qualify?

Do these qualify?

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Replying to rachel_natalie:
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By User deleted
22nd Aug 2013 14:47

Don't know

pawncob wrote:

Do these qualify?

There 's nothing in the question (question 1, that is) to suggest that they don't. Equally, there's nothing to suggest that they do. I was simply pointing out the possibility of income tax relief, rather than categorically stating that the loss must be set against capital gains.

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By flurrymc
22nd Aug 2013 16:47

as a general rule -

if the loan write off qualifies for capital gains loss, s253, treatment the shares will qualify for s131, capital loss against income.  If the shares do not qualify for s131 the loan will not qualify for s253.  Subject to detailed analysis and caveats.

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By EISman
22nd Aug 2013 18:22

There is no general rule

The tax treatment will depend on the circumstances. 

The tax treatment of the loss on the shares is not dependent on the treatment of the loss on the loan (and vice versa).

Loss on company shares

If a loss is incurred on disposal of the shares or liquidation of the company, it is a capital loss. 

Unless it is a loss on disposal to a 'connected person' (in which case it can only be relieved against gains made on transactions with the same person - s18(3) TCGA 1992), it is first set off against other capital gains of the same year (if any), and any balance carried forward indefinitely until a capital gain is available against which it can be set. 

The loss claim must be made in the tax return for the year in which the loss is incurred, in order to be able to carry it forward for future use.

In some circumstances where there is no disposal or liquidation, but it can be demonstrated to HMRC's satisfaction that the company is worthless, a capital loss might be claimed under s24(2) TCGA 1992 on the basis that the shares had become of negligible value.  Such a claim can be back-dated up to two tax years, provided the company was also demonstrably worthless at the earlier time.

 If the person making the loss originally subscribed for the shares and either the subscription qualified for EIS income tax relief, or the company meets the conditions of an EIS qualifying company, under s131 Income Tax Act 2007 the capital loss may be claimed against income as an alternative to setting off against capital gains.

Loan

If a loan by an individual to a trading company has become irrecoverable, provided the loan was used by the company in its trade, under s253 TCGA 1992 a capital loss can be claimed.

This loss is dealt with in the same way as the capital loss on company shares outlined above.

There is no facility to set a capital loss on a loan against income.

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By abrarseyrie
26th Jan 2014 22:40

Directors paying the creditors personally in course of liquid

Hi

Wondering if I am right in having the opinion that "if a director, in the due course of company liquidation, has to pay personally some of the creditors (due to personal guarantee) then the amount paid is a capital loss for him available for relief against capital gains by S253" ?

thanks in anticipation

 

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