Losses on Unlisted Shares Print
If an individual who has subscribed for shares forming part of an unlisted trading company’s ordinary share capital, disposes of them at a loss for CGT purposes, then subject to the restriction imposed by the cap on unlimited reliefs, a claim may be made to set the allowable loss against the individual’s income tax liability for that year, or against the income of the year preceding that in which the loss is incurred. The claim must be made within 12 months after 31 January following the year of assessment in which the loss is incurred. (I.e. within approximately 22 months of the end of the year in which the loss arose.) For shares acquired after 5 April 1998 the relief is restricted to shares in companies that would have qualified for relief under the Enterprise Investment Scheme (“EIS”).
A company on the Alternative Investment Market (“AIM”) is treated as an unlisted company, and therefore losses arising from subscription for such investments may also qualify for relief.
This loss relief replaces the normal CGT loss relief (offset of losses against chargeable gains). This may be particularly beneficial:
- As the rate of CGT is no higher than 28%, and the loss may be set against income on which tax is charged at 40%, or 45%.
- In a year in which no chargeable gains have arisen, or the gains are less than the annual exemption.
- In a year when the chargeable gains are covered by CGT losses brought forward.
It should be noted that this relief cannot be obtained in respect of the disposal of shares for which Business Expansion Scheme relief was obtained on acquisition.