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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: more complex cases: mixed holdings and part disposals: introduction


The availability and amount of Share Loss Relief is closely linked to the existence and amount of an allowable loss computed under the rules in TCGA 1992. But there are some situations in which the TCGA rules result in a figure which does not properly reflect the actual loss on shares which qualify for Share Loss Relief. This part of the guidance explains those situations and how special rules in the ITA deals with them.

The problems stem from the fact that the TCGA often treats holdings of assets of an identical, or nearly identical, type as a single asset. This ‘pooling’ is described at TCGA 1992/S104 and although it is normally thought of as applying to shares (hence our interest here) it is capable of applying also to any assets of a nature to be dealt in without identifying the particular assets disposed of or acquired. It does not distinguish between shares which are capable of being qualifying shares for Share Loss Relief purposes and otherwise identical shares which are not. Without the pooling provisions and other rules in the TCGA there would be serious problems in identifying shares disposed of out of a larger holding with the specific acquisitions which made up that holding. There is guidance on the TCGA share identification rules at CG50500+.

The TCGA rules treat pooled shares as a single asset which grows or diminishes with each acquisition or disposal of shares in the same company and of the same class and which are held in the same capacity. The allowable costs of shares in the pool are averaged and that average figure is taken as applying to shares disposed of. If the pool contains both qualifying shares and shares which are not capable of being qualifying shares then a disposal out of the pool will raise the following two questions.

  • To what extent are the shares disposed of treated as being qualifying shares? If the whole of a holding is disposed of then this becomes a question about any previous disposals of shares out of the holding, as that will determine the composition of the holding when it is finally disposed of in its entirety.
  • If it is determined that there has been a disposal of qualifying shares, what is the capital loss in respect of those shares? The allowable loss for TCGA purposes will be influenced by the costs of other shares in the pool, including shares which are not capable of being qualifying shares. It will be necessary to identify qualifying shares disposed of with specific acquisitions of qualifying shares, and consider the actual costs of the latter.

Defined terms

ITA07/S147 and S148 address the questions raised in the introduction above. They use the following defined terms.

Holding This means any number of shares of the same class held by one individual in the same capacity and growing or diminishing as shares of that class are acquired or disposed of. Shares are treated as being of the same class only if they are so treated by a recognised stock exchange, or would be so treated if dealt with on such an exchange. Where a person acquires shares as an employee of a company or of any other person and those shares are subject to restrictions on his right to dispose of them then those shares are treated as being of a different class from others not so acquired.
Mixed holding This a holding which includes shares that are not capable of being qualifying shares and other shares. Notice that this definition does not demand that any shares actually be qualifying shares, merely that some of the shares in a holding must not be capable of being qualifying shares.
Not capable of being qualifying shares. For the purposes of sections 147 and 148 there are certain features which mean a share to which enterprise investment relief is not attributable is not being capable of being a qualifying share. These are:
  • if the individual claimant acquired the share otherwise than by subscription
  • if either of the gross assets or the unquoted status requirements are not met in relation to the issue of the shares (Condition C of a qualifying trading company: see VCM75100 - VCM75110)
  • if Condition D of a qualifying trading company (the company’s relationship to the UK) would not be met if the shares were to be disposed of at the time in question (see VCM75120).        
      Section 104 holding This has the meaning given by TCGA92/S104(3). It means a holding of shares or securities of a company (or of other assets apt to be dealt in without distinguishing between them) which is treated as a single asset under TCGA92/S104(1). The TCGA share identification rules changed for disposals on or after 6 April 2008.  
      Old section 104 holding This is a similar holding under the pre April 2008 version of TCGA92/S104.  
      1982 holding This has the meaning given by TCGA92/S109(1), as that section applied to disposals before 6 April 2008. In summary, shares in the same company and of the same class acquired between 7 April 1965 and 5 April 1982 were pooled and when indexation allowance was introduced on 6 April 1982 those pools were ‘frozen’ in the sense that they could not generally be added to. For guidance on 1982 holdings, see CG50870+.