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Loss relief

Loss relief

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My client has invested £100k in a small venture (by way of a loan) and it has failed - Big Time - so much so that the venture itself is about to go into administration.

There are no creditors other than him and his loans 

He has been advised by the IP who is about to be appointed that if he capitalises the loan to shares, the winding up will not be an insolvent winding up and so it will be cheaper fees, and there will not be any future issues around the directors necks.

My concern - and I thought I recalled reading it on Aweb somewhere, was that if he did this, he would not get future CGT relief on that 100k as he was capitalising the shares now knowing they were worthless 

I would be grateful if someone could confirm - or correct me as I may be getting wires crossed insofar as it might be that capitalising will restrict the income tax loss relief that might otherwise have been available

Thanks in advance

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By ChrisMartin
17th Jul 2013 14:59

Negligible value

You're thinking (at least I think this is what you're thinking) of a negligible value claim under something like ITA 2007 s131. The point here is that the shares have to have become of negligible value; you can't get relief where you create shares out of something that was already worthless. 


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By Ding Dong
17th Jul 2013 15:03

yes - i think.....

......that is it !

I had already advised that he couldn't get the loss relief on income tax but I had this niggling doubt, that if the loan was capitalised he then wouldn't get the CGT loss relief too (and as he has a lot of quoted shares in his portfolio with gains sat in there far outweighing this 100k loss) I would hate him to lose £28k of CGT savings by saving a £2k on the IP fees!



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