VCM47200 - VC loss relief: mixed holdings: total disposal of holding: relief restricted: example
ICTA88/S576 (1)
In this example all the shares are sold and the restriction at
STEP 4 of
VCM47150applies.
FACTS
- In December 1994 a taxpayer subscribes for 2,000 shares in C Ltd at a cost of £5,000.
- In August 1995 the taxpayer buys a further 1,000 shares at a cost of £15,000.
- In January 2002 the taxpayer makes a negligible value claim and it is agreed the shares have no value.
- C Ltd is a qualifying trading company.
The shares fall to be dealt with in a Section 104 holding. The computations are as follows:
| Number of shares held | Actual cost | Indexed cost | |||||||
| December 1994 subscription |
| 2,000 |
|
| £5,000 |
|
| £5,000 |
|
| Indexation December 1994 to August 1995 |
|
|
|
|
|
|
| £135 |
|
|
|
| 2,000 |
|
| £5,000 |
|
| £5,135 |
|
| August 1995 purchase |
| 1,000 |
|
| £15,000 |
|
| £15,000 |
|
|
|
| 3,000 |
|
| £20,000 |
|
| £20,135 |
|
To find the VC loss relief potentially due go through the fours
steps described in
VCM47150.
Step 1
Compute the allowable loss in the usual way. This is
£20,000. Remember that indexation cannot create or increase a
capital loss for disposals after 29 November 1993.
Step 2
Identify the qualifying and the non-qualifying shares. There
are 2,000 qualifying shares and 1,000 shares that do not qualify.
Step 3
Calculate the part of the allowable loss which arises on the
qualifying shares.
| £20,000 x | 2,000 | = £13,333 |
|
| 3,000 |
|
Step 4
Compare the figure in Step 3 of £13,333 with the actual
cost of the qualifying shares, which was £5,000. VC loss
relief may be claimed on the lower figure of £5,000. The
balance of the loss is £20,000 less £5,000 = £15,000
and is available as a capital loss.
