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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: limiting Share Loss Relief: first case

ITA07/S147 starts with the premise that an individual has disposed of qualifying shares and sets out three groups of circumstances in which the amount of Share Loss Relief available on that disposal may need to be limited to a figure below the allowable loss computed for TCGA 1992 purposes. In general terms, the aim of section 147 is to prevent Share Loss Relief exceeding the amount actually given for the qualifying shares.

The first group of circumstances is where the shares disposed of were, or had in the past been, part of a pooled holding of shares for TCGA 1992 purposes. There are three ways in which this might be so.

1. Where the shares disposed of formed part of a section 104 holding at the time of the disposal. The section 104 holding does not have to be a mixed holding: in any event, under the TCGA rules the costs of the shares not disposed of (and the costs of non-qualifying shares disposed of at the same time) will influence the expenditure allowable in computing the loss on the qualifying shares disposed of. The allowable loss computed under TCGA rules may therefore not reflect the loss on the qualifying shares themselves.
1. Where at a time before the disposal but after 5 April 2008 the shares formed part of a section 104 holding. Even though the shares in question were not part of a section 104 holding when they were disposed of, the fact that they had been in such a holding will mean that under the TCGA rules the allowable expenditure attributed to them will have been influenced by the other shares which had been in any earlier holding along with them.
1. Where at a time before both the disposal and 6 April 2008 the shares formed part of an old section 104 holding or a 1982 holding. This is for the same reason as in 2. above.

Where any of these three circumstances apply, the amount of Share Loss Relief is not to exceed the sums allowable as deductions in computing the loss if the qualifying shares had not formed part of the holding. In other words you must compute the allowable loss using the share identification and computation rules in the TCGA and compare that with the deductions which you would allow in a computation relating exclusively to the qualifying shares. Share Loss Relief will be due in the smaller amount. In order to determine the deductions allowable in respect of the qualifying shares in their own right you will need to identify the shares disposed of with specific acquisitions of qualifying shares, and there is guidance on how to do this at VCM75450 and VCM75460.