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Write off of investment in shares

My client has £50k in shares that are now deemed to have a negligible value. What is the tax effect?

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My client made a £50k investment in shares in two unlisted companies. Whilst the shares have not been sold, they are considered to have negligible value and the directors wish to revalue in the accounts. Is there any corporation tax option regarding this? I presume the loss is written back in the corp tax comutation and a capital loss occurs when the shares are finally sold?

Thanks

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By Youareatit
02nd Dec 2020 14:17

james2802 wrote:

My client made a £50k investment in shares in two unlisted companies. Whilst the shares have not been sold, they are considered to have negligible value and the directors wish to revalue in the accounts. Is there any corporation tax option regarding this? I presume the loss is written back in the corp tax comutation and a capital loss occurs when the shares are finally sold?

Thanks

Posted by james2802, Accountant
Joined March 2020

'' considered to have negligible value ''

Expand.

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Replying to DJKL:
Psycho
By Wilson Philips
02nd Dec 2020 14:48

The underlying principle is the same, but that article deals specifically with individuals - OP is talking about a corporate investor.

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Replying to Wilson Philips:
Hallerud at Easter
By DJKL
02nd Dec 2020 15:04

Long day, I did not twig the investor was a company. (Always read the question, always read the question, always read the question........ as was drummed into me at school)

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Replying to DJKL:
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By Tax Dragon
02nd Dec 2020 15:17

I can't blame you if that principle has become less rigorously applied in this forum. I would guess when you were at school, questions were more consistently coherent.

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Replying to Tax Dragon:
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By 356B
02nd Dec 2020 16:26

If only that were true. I recall PE2 questions that even the lecturer couldn't understand.

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Replying to Tax Dragon:
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By memyself-eye
02nd Dec 2020 19:44

...and written with a quill pen.

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Replying to DJKL:
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By Paul Crowley
02nd Dec 2020 21:04

I sat an ICAEW tax exam where the question failed to disclose the disposal proceeds on the CGT question.
Question 6 as I remember

A bit like questions on this forum

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Replying to Paul Crowley:
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By Tax Dragon
02nd Dec 2020 22:45

Paul you haven't provided enough information to know whether proceeds were relevant. Was it an exempt asset? NG/NL? Did s17 (or whatever it was called back then) apply? Was there an income tax charge? Etc.

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Replying to Tax Dragon:
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By Paul Crowley
03rd Dec 2020 00:07

Simple CGT disposal, date (relevant for indexation ) but no proceeds
I was first to notice as I always looked for CGT first

Asked invigilator if anything to be read out, no, so just made a figure up

Later invigilator was repeatedly asked as people worked through the paper. Eventually he stopped everyone working to explain the problem and suggested making a figure up.

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Replying to Paul Crowley:
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By james2802
03rd Dec 2020 10:28

Thanks for the suggestions. My humble apologies for not phrasing the question precisely enough!

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Melchett
By thestudyman
02nd Dec 2020 23:23

Negligible value claim as Wilson has mentioned applies to individuals only, not companies investing in other companies.

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Replying to thestudyman:
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By richard thomas
03rd Dec 2020 09:47

Wilson did not say that, but said that the article only applies to individuals, which it does because it is about claims on those assets which for an individual are within the scope of TCGA (but which for a company may not be eg goodwill, loans) and about income tax reliefs.

I cannot see anything in s 24(1A) to (4) TCGA 1992 which says that a company may not make a negligible value claim if an asset is a chargeable asset which shares in another company are. What is your source for your statement, as it cannot be Wilson's comment?

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Replying to richard thomas:
Psycho
By Wilson Philips
03rd Dec 2020 10:49

+1 :)

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Replying to richard thomas:
Melchett
By thestudyman
03rd Dec 2020 22:13

I am looking at this factsheet, not legislation

https://www.gov.uk/government/publications/negligible-value-claims-and-i...

A major clue would be section 14, where it mentions the loss is allowed before any deduction of personal income tax allowances.

The factsheet (breadcrumb link on website) is also filed under the Self-assesssment section on the HMRC website, another clue that this relief is applicable only to individuals/natural persons.

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Replying to thestudyman:
Psycho
By Wilson Philips
03rd Dec 2020 22:41

Oh for heavens sake. You are looking at a self-assessment helpsheet. Why do you think there would be any reference to corporation tax treatment in there?

If you insist on looking at HMRC guidance rather than the legislation you would be better looking at the Capital Gains Manual.

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Replying to Wilson Philips:
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By richard thomas
04th Dec 2020 08:07

And in that Manual I would start with CG53000 and onwards, as it may well be that no loss is available because of s 192A of, and Schedule 7AC to, TCGA 1992 (the substantial shareholdings exemption) which apply to losses as well as gains - see eg para 33 of that Schedule on neg value claims).

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Replying to richard thomas:
Psycho
By Wilson Philips
04th Dec 2020 09:20

Agreed - it’s one of the most common mistakes that I see as regards loss claims.

That, and overlooking s176.

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Replying to thestudyman:
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By Tax Dragon
04th Dec 2020 06:53

That is a bit like saying you can't be offside in rugby because offside is explained in guidance on football.

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