Kirkpatrick & Hopes - Succession Planning Accountants

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Have you suffered any losses on unquoted shares?

If you have invested money in an unquoted trading company (including losses on AIM shares), then you may be entitled to an income tax refund.

The rules are quite complicated but are broadly as follows:

• The shares need to be ‘subscribers shares’. This means that you were the first owner of the shares and you acquired them from the company as opposed to buying them from someone else.

• The loss must have been made by you selling the shares, or

• The company being wound up, or

• You making a negligible value claim

• The shares must be owned in a trading company

The loss is calculated using normal Capital Loss rules. For example, if you paid £10,000 for 10,000 Ordinary £1 shares in XYZ Limited and you sell the shares for £5,000, you have made a £5,000 loss.

If the loss arises in the 2011/12 tax year, you can claim this loss as an income tax deduction against your income for either the 2011/12 tax year or carried back against your income for the 2010/11 tax year.

In the example above, this could result in a tax refund of £2,500 if you are a 50% taxpayer (£2,000 for 40% taxpayers and £1,000 for basic rate taxpayers), so the relief is well worth claiming.

You do not have to actually dispose of the shares to make a claim. If you have invested in a loss-making company that continues to trade, you may be able to make a negligible value claim to obtain the tax relief.

As always, if I can help in any way, do please get in touch.

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