Picture the scene; you have carefully invested your money purchasing shares in a listed company with the hope of one day making significant returns on your investment. However, what do you do when the company folds and your shares become worthless?
Earlier this year, Carillion, which was one of the UK’s largest construction companies, hit the headlines having collapsed under £1.5bn of debt. Share trading was immediately suspended and HMRC have now accepted that any shares held by investors can be treated as having ‘Negligible Value’ but what does this mean from a tax perspective?
A negligible value claim is a useful capital gains tax relief that enables a taxpayer to reduce their tax liability if they own assets that have become worth next to nothing since their acquisition.
The relief enables the taxpayer to crystallise a capital loss, which is effectively the original cost of the asset, that can then be set against other capital gains in the current tax year, or be carried forward against gains in future tax years. It is also possible to backdate a claim and treat a loss as arising in either of the two preceding tax years which can be useful if a taxpayer has no gains in the current tax year but has taxable gains in either of the previous two.
Where shares are unlisted and of negligible value, it is possible to claim the loss against income and obtain income tax relief but there are a significant number of conditions that need to be met in order to make this claim.
If you hold Carillion shares or any other assets which are of negligible value, or you would like further information on this topic, then please contact Jill Walker (email@example.com) or your usual AAB advisor.
To find out more about Jill, click here