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HMRC internal manual

Business Income Manual

From
HM Revenue & Customs
Updated
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Underwriting of shares: casual underwriting

Where a person is found not to be carrying on a trade of underwriting, the commission they receive for underwriting a share issue is chargeable to Income Tax or Corporation Tax as miscellaneous income within the sweep up charge at BIM100101 onwards.

If the share issue is not fully subscribed, the underwriter has to buy any remaining shares. The underwriter will then seek to sell those shares. Where the underwriter sells at a loss, this loss can be regarded as an allowable expense in computing the chargeable profits.

Sometimes the underwriter will still hold some of the shares at the end of the tax year (for individuals) or accounting period (for companies). If the shares are worth less than the underwriter paid, then the difference between cost and market value can be regarded as an allowable expense in computing the chargeable profits.