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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: more complex cases: shares received under rights issues

This is the second of a group of complicating factors in which a shareholder comes to own shares or other assets by virtue of their already owning shares in the issuing company (the first, bonus shares, is dealt with at VCM75330). Subject to certain conditions being met, it may be that the shares acquired under a rights issue can also give rise to Share Loss Relief when disposed of and if that is so then questions will arise as to the amount of loss properly attributable to them.

Shares received in a rights issue are subject to the same conditions and requirements in order for Share Loss Relief to be available as shares obtained in other circumstances. The recipient will have subscribed for the new shares and given consideration for them, as required by ITA07/S131(2)(b). Whether Share Loss Relief is in fact due will depend on whether the shares are shares in a qualifying trading company. Guidance on the meaning of qualifying trading company is at VCM74320+.

The amount of Share Loss Relief available cannot exceed the amount or value of the new consideration given for the new shares.

ITA07/S136 is not in point in relation to shares received in a rights issue. This is because one of the conditions for section 136 to apply is that the new shares disposed of be identified with other shares previously held by the claimant. This means that the other shares are no longer held. For detailed guidance on ITA07/S136, see VCM75390.