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HMRC internal manual

Venture Capital Schemes Manual

HM Revenue & Customs
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Share Loss Relief: individual and corporate claimants: individual claimants: when relief is restricted: taking account of further acquisitions (mixed holdings)

In many cases a claimant will have subscribed for shares, held those shares for a time, and then disposed of the same shares. It will be easy to identify the shares disposed of with shares acquired in order to decide the availability of Share Loss Relief, for instance by determining whether the shares were qualifying shares (see VCM71020 for the meaning of qualifying shares).

VCM70170 mentions the possibility that a claimant will have come to hold shares (which may differ from those originally subscribed for) by virtue of having owned the original shares. A claimant may also have acquired shares in the same company and of the same class in other ways, for instance by further subscription, or by purchase in the market or by private treaty, or through gift or inheritance. In each case the new shares will often be pooled with the original, qualifying shares and will together form a single asset for the purposes of computing chargeable gains and allowable losses under the provisions of the TCGA.

This will lead to a problem if there is a claim to Share Loss Relief: the TCGA share identification rules do not distinguish between shares which are qualifying shares for Share Loss Relief purposes and those which are not - they are pooled together and their allowable costs effectively averaged across the pool. It follows that a single allowable loss computed for TCGA purposes may represent the disposal of both qualifying and non-qualifying shares, and if part of that loss is apportioned to qualifying shares then the cost effectively allowed in computing the apportioned amount will be influenced by the cost of non-qualifying shares disposed of at the same time and of other shares not disposed of. This would violate the principle of allowing Share Loss Relief only of an amount equal to the actual loss on qualifying shares disposed of.

There is guidance at VCM75400+ on disposals or part disposals of ‘mixed holdings’. The guidance first considers the simple case of a ‘clean’ holding of shares which was unchanged throughout the time for which it was held.