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Negligible Value Claim
Do you own shares that have become worthless?
Since the onset of the credit crunch, many companies have either ceased trading or their shares have become worthless - Northern Rock and Bradford & Bingley being amongst the more high profile cases. We look at how such shareholdings are treated for Capital Gains Tax.
Negligible Value Claim
If you own an asset that has become of negligible value (ie worth next to nothing) you can make a “Negligible Value Claim” to HMRC which will enable you to write off the asset as a capital loss, to offset against other gains and thereby reduce your tax bill.
For Capital Gains Tax purposes you will be deemed to have sold the asset and immediately re-acquired it at the time the claim is made for an amount equal to its value.
To be eligible to make a Negligible Value Claim you must still own the asset at the time you make the claim.
How to Make a Claim
To make a Negligible Value Claim you should write to your local tax inspector by making an entry on your tax return, or by letter. You should povide details of the negligible value claim and your calculations of the capital loss resulting from the deemed disposal of the asset.
Specify the Date of your Claim
It is worth bearing in mind when you make a negligible value claim, that you can specify the date you would like the deemed disposal to be treated as having occured - which could be anytime within the previous two tax years. So if you have suffered losses during 2008 - 2009, but made gains during the previous year, you can request that your Negligible Value Claim be carried back to set off against those earlier 2007-2008 gains.
Each year HMRC produce a list of shares and securities formerly quoted on the London Stock Exchange which have officially been declared of Negligible Value, along with the date they are accepted to be of negligible value:
Negligible Value List >>
If your shares or securities are not on the list, then you should submit form CG34 to HMRC along with your claim letter, which will then be referred to the Shares & Assets Valuation Office.
Completing Your Tax Return
To claim a loss in respect of an asset that was or became of negligible value during 2008-09, you should complete your SA108 as usual, treating the negligable value asset as if you had disposed of it.
You will also need to put an ‘X’ in box 20, 26 or 33 of the SA108 (as applicable) and provide details of your negligible value claim in box 35. This should include the date during 2008-2009 when you want to be treated as if you had sold the asset.
If you wish use the loss to offset gains in an earlier tax year, eg 2007-2008 then you will need to either amend your 2007/2008 Tax Return online or submit a request to HMCR in writing.
Offset the Loss Against Income
If the shares you own are in an unlisted company, you may be able to use the deemed Negligible Value loss to offset against your income instead of capital gains. There are specific criteria that the company you have invested in must meet in order to for you to qualify for Income Tax Relief; and the loss needs to be claimed within one year of 31 January following the year in which the loss was made.
You can learn more on this Help Sheet >>
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