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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: corporate claimants: how relief is given (2)

Once you have established the amount of Share Loss Relief due to a claimant company you will need to determine how and in what accounting periods it is to be given.

VCM77040 explains that relief is given in the first instance against income of the accounting period in which the loss accrued and then, if the company so claims, against income of an earlier accounting period. The earlier accounting period must fall wholly or partly within the 12 months immediately preceding the accounting period in which the loss accrued, and if it falls only partly within the period of loss then the relief due is limited to the income attributable to the period of overlap.

CTA10/S71 explains in detail how relief is given.

Step 1 is to deduct relief from the company’s income for the accounting period in which the loss is incurred.

Step 2 applies if the company claims relief for an earlier accounting period also, and there is relief remaining after step 1. The remaining loss is deducted in calculating the company’s income for any accounting period falling wholly or partly within the 12 month period immediately preceding the period of loss. Where there is more than one such earlier period, relief is given in a later period before an earlier period.

Relief is given at step 2 only after relief has been given for the period in question in respect of Share Loss Relief on an earlier loss. So if an eligible company has three accounting periods:

A: six months, income £1000, immediately followed by

B: six months, income £200, Share Loss Relief £500, immediately followed by

C: twelve months, income £100, Share Loss Relief £1,200

The Share Loss Relief arising in period B must be set first against the £200 income of period B and then against the income of period A. The Share Loss Relief arising in period C must be set first against the income of period C and then against the income of period A net of the relief from period B. The result is

Period A: Net income (£1,000 minus £300 relief from period B minus £700 relief from period C =) Nil

Period B: Net income (£200 minus £200 relief from period B =) Nil
All relief used, no allowable loss available to set against chargeable gains.

Period C: Net income (£100 minus £100 relief from period C =) Nil, £700 relief used in period A, £400 relief unused so £400 allowable loss available to set against chargeable gains accruing in period C.

Note that Share Loss Relief not used in any accounting period ‘reverts’ to the character of an allowable loss for capital gains purposes. VCM74050 describes the corresponding provision for individual claimants.

Deductions from income in respect of relief under the Corporate Venturing Scheme (FA2000/SCH15/PT7) are made before deductions for Share Loss Relief.