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HMRC internal manual

Venture Capital Schemes Manual

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HM Revenue & Customs
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Share Loss Relief: individual and corporate claimants: individual claimants: distributions by a company which are treated as disposals made by its shareholders

Under TCGA92/S122 when a person receives or becomes entitled to receive, in respect of shares in a company, any capital distribution from that company he or she is treated as having disposed of an interest in those shares. The capital distribution is the consideration for that disposal. See the guidance at CG57800+. It is only if the capital distribution is in the course of dissolving or winding up the company that there is a disposal of the shares for Share Loss Relief purposes. This is because of ITA07/S131(3)(b).

Where there is more than one distribution in the course of winding-up, gains or losses on an interim distribution may be calculated on the basis set out in CG40432. However, in such a case an understatement of the residual value of the shares could produce an inflated loss for Share Loss Relief purposes at the time of the interim distribution, and a chargeable gain on a later distribution. An overstatement of the residual value will have the opposite effect. You should ask Shares and Assets Valuation (SAV) for their opinion of the residual value of the shares following an interim distribution in any case where:

  • a chargeable gain arose on an interim distribution and Share Loss Relief is claimed in respect of a later distribution; or
  • Share Loss Relief is claimed in respect of an interim distribution, and the residual value shown in the computation is not known to be in accordance with the total amount of all later distributions.

For general guidance on distributions in a winding-up being treated as disposals of shares for chargeable gains purposes, see CG40430.