VCM46050 - VC loss relief: general: amount eligible for relief: example

ICTA88/S574

The following example illustrates the straightforward application of ICTA88/S574.

In June 1996 an investor subscribes for 50,000 shares in A Ltd, a qualifying trading company, for £50,000 and obtains EIS income tax relief (see VCM25000 onwards) of £10,000 (£50,000 x 20%).
In January 2000 the investor sells all the shares, to an unconnected purchaser, for £15,000. Income tax relief of £3,000 (£15,000 x 20%) is withdrawn, see example 1 at VCM26100. The income tax relief not withdrawn that remains attributable to the shares sold is £7,000 (£10,000 less £3,000).
The incidental costs of making the disposal were £250.

The shares fall to be dealt with in a TCGA92/S104 holding. The computations are as follows:

	Number of shares held		Actual cost		Indexed cost
June 1996: section 104 holding created		50,000		£50,000		£50,000
April 1998: indexation (factor 0.063) [#]						£3,150
		50,000		£50,000		£53,150
January 2000: disposal of all 50,000 shares		50,000		£50,000		£53,150

The disposal of the shares in January 2000 results in an allowable loss, as follows:

	Disposal proceeds		£15,000
	Costs of disposal		(£250)
			£14,750
Lower of actual cost and indexed cost [#]		£50,000
Less income tax relief not withdrawn		(£7,000)	(£43,000)
	Allowable loss 1999-00		(£28,250)

[#] For individuals, indexation has been frozen at April 1998 - see CG17207. For disposals on or after 30 November 1993 indexation allowance cannot create or enhance an allowable loss.

The taxpayer may claim VC loss relief in respect of the allowable loss of £28,250.

Home|Main Contents|Manual Contents

Previous Page|Next Page|Top|Menu