Where a person is found not to be carrying on a trade of
underwriting, they are liable under Case VI on the commission they
receive for underwriting a share issue.
If the share issue is not fully subscribed, the underwriter
has to buy any remaining shares. The underwriter will then seek to
sell those shares. Where the underwriter sells at a loss, this loss
can be regarded as an allowable expense in computing the profits
assessable under Case VI.
Sometimes the underwriter will still hold some of the shares
at the end of the tax year (for individuals) or accounting period
(for Companies). If the shares are worth less than the underwriter
paid, then the difference between cost and market value can be
regarded as an allowable expense in computing the profits
assessable under Case VI.
