VCM45800 - VC loss relief: general: qualifying disposals: general

ICTA88/S575 (1)

ICTA88/S575 (1) limits the disposals to which ICTA88/S573 and ICTA88/S574 apply. In order to qualify for relief against income, the loss must have arisen as a result of:

• a bargain made at arm's length for full consideration, or
• a distribution in the course of the liquidation or winding-up of the company, or
• a negligible value claim under TCGA92/S24 (2), or
• for disposals on or after 1 April 2000 (for ICTA88/S573) and 6 April 2000 (for ICTA88/S574), a disposal within TCGA92/S24 (1), such as the dissolution of the company.

Before April 2000 ESC/D46 allowed relief for capital losses when a company without assets was dissolved provided all the other conditions for the relief were met, see VCM45850.

Where there is more than one distribution in the course of a winding-up, gains or losses on an interim distribution may be calculated on the basis set out in CG40432. However, in such a case an understatement of the residual value could produce an inflated loss relief claim under ICTA88/S574 on the interim distribution, and a chargeable gain on a later distribution. An overstatement of the residual value will have the opposite effect. You should ask Shares Valuation for their opinion of the residual value of the shares following an interim distribution in any case where:

• a chargeable gain arose on an interim distribution and relief is claimed under ICTA88/S574 in respect of a later distribution; or
• relief is claimed under ICTA88/S574 in respect of an interim distribution, and the residual value shown in the computation is not known to be in accordance with the amount of all later distributions.