Tax & Accounting News

Saving Up ‘Negligible Value’ Losses

29/10/2009

Many taxpayers will be used to offsetting losses made on investments against Capital Gains Tax (CGT) in the year the loss occurred. In some cases, losses can also be offset against income – notably losses made on subscribed-for shares in certain trading companies.

Any loss will be counted when a disposal takes place – either an actual disposal or a claim that shares have become of ‘negligible value’. Crucially, a negligible value claim does not have to be made as soon as shares lose their value, but can be deferred until a year in which the loss can be most beneficially used. At present, that means high earners may wish to defer such a claim until after 5 April 2010, in order to set the loss against income taxed at 50 per cent, rather than 40 per cent.

However, it should be remembered that if an asset is lost, destroyed, dissipated or extinguished completely (for example, where a company is struck off), the event constitutes a disposal whether or not a ‘negligible value’ claim has been made – it is only possible to defer a claim for as long as the company remains in existence.

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