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HMRC internal manual

Venture Capital Schemes Manual

Share Loss Relief: individual and corporate claimants: individual claimants: giving relief

The way Share Loss Relief works for individuals is set out in ITA07/S133.

The amount of relief due in a tax year is limited to the smaller of the total Share Loss Relief available and the net amount of the total income less other reliefs and allowances already deducted for that year (subject to the priority rules described below and, for losses made in 2013-14 onwards, to the limit on income tax reliefs (VCM74035)). Where, for a tax year of claim, an individual has sufficient income, all of the available Share Loss Relief must be deducted in calculating that individual’s net income of that tax year. This is described at ‘Step 1’ in section 133(1). A claimant is therefore unable to restrict the Share Loss Relief given, for example to leave an amount of income in charge to be covered by personal allowances.

If a claim is made for relief to be given in two tax years then the claimant must state the year in which relief is to be given first. Only so much, if any, of the total available relief as is greater than the income of that priority year can be deducted from the income of the other year. This is described at ‘Step 2’ in section 133(1). The claimant cannot specify any other allocation of the total relief due.

An individual may make a claim in respect of a loss arising in tax year 1 (‘the first claim’) and a separate claim in respect of another loss arising in tax year 2 immediately following tax year 1. Both claims may be in respect of income in tax year 1. If this happens then priority is given to the claim in respect of the loss arising in the earlier year, tax year 1, even if the claim for tax year 2 has been made before this claim.

Example 1

This example illustrates what happens when Share Loss Relief in respect of two years is claimed against the income of one.

An individual has net income in 2008-09, after taking account of any other reliefs or allowances already deducted, of £50,000

Share Loss Relief is due for losses arising in 2008-09 (£30,000) and 2009-10 (£60,000).

Claims to Share Loss Relief are made in respect of the 2009-10 loss on 28 September 2010 and in respect of the 2008-09 loss on 18 January 2011. Both claims require relief against income of 2008-09.

Relief of £50,000 is given against income in 2008-09: £30,000 in respect of allowable losses in 2008-09 and £20,000 in respect of allowable losses in 2009-10. This is the case even though the losses of the later year were subject to a claim before the losses of the earlier year. If any of the £30,000 allowable losses in 2008-09 have been set against chargeable gains, the necessary adjustments must be made in order effectively to withdraw the benefit of those losses (see ‘interaction with CGT’ below).

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Example 2

This example illustrates how Share Loss Relief of one tax year may be relieved against income of one or two tax years, as the claimant requires, subject to certain restrictions.

An individual has

  • an allowable loss of £80,000 on the disposal of shares in 2008-09;
  • income (before personal or other allowances) of £25,000 in 2008-09; and
  • income (before personal or other allowances) of £20,000 in 2007-08.

The individual may claim Share Loss Relief in either or both of the following ways:

  • against income of 2008-09: £25,000;
  • against income of 2007-08: £20,000.

But the amount of relief in either year may not be restricted to any lower figure. If the individual claims relief against the income of both years, the claim must specify the year for which a deduction is made first. The balance of the allowable loss not used (say £35,000 if relief is claimed for both years) is set against any chargeable gains realised by the taxpayer in 2008-09, or is carried forward and set against future gains.

If the allowable loss had been only £30,000 the individual could claim:

  • Share Loss Relief of £25,000 against income of 2008-09 and then either claim Share Loss Relief for 2007-08 on the balance of £5,000 or set this against any chargeable gains of 2008-09 or later years; or
  • Share Loss Relief of £20,000 against income of 2007-08 and then either claim Share Loss Relief for 2008-09 on the balance of £10,000 or set this against any chargeable gains of 2008-09 or later years.

Remember, a claim cannot limit the amount of Share Loss Relief to less than the amount of a particular capital loss, for example in order to make use of personal allowances that would otherwise be unused because a greater amount of Share Loss Relief is available.