Share loss relief: individual and corporate claimants: similarities and differences: introduction
The conditions which must be met by the claimant and the company whose shares are disposed of are very much the same whether the claimant is an individual or a company. However, the structure of the relevant legislation containing those conditions differs. For instance, the legislation applicable to individual claimants has to accommodate the possibility that EIS relief is attributable to the shares disposed of and so ITA 2007 refers to this at various points.
The following concepts and main conditions are common to both classes of claimant.
- The claimant must have subscribed for shares (or in certain circumstances be treated as having subscribed for shares). Note, however, that an individual claiming Share Loss Relief in respect of EIS shares does not have to have subscribed for them him or herself.
- The shares must be disposed of (or be treated as having been disposed of in certain circumstances, for example, under a negligible value claim).
- The disposal must be by way of a bargain at arm’s length.
- If the disposal occurs by virtue of the operation of TCGA92/S137 (an anti-avoidance provision which may apply to share-for-share exchanges and company reconstructions) then any loss is not eligible for Share Loss Relief, even if it remains an allowable loss for TCGA purposes. For guidance on TCGA92/S137, see CG52521+ and CG52700+.
- The disposal must give rise to an allowable loss for the purposes of capital gains tax or corporation tax on chargeable gains, as computed under TCGA 1992.
- The concept of a ‘qualifying trading company’: if the shares disposed of are not EIS shares then the company which issued them must have been a qualifying trading company at certain times and throughout a specified period.