VCM48400 - VC loss relief: special rules for share reorganisations: new consideration given for new shares: procedure
ICTA88/S575 (2)(b)
Because the problems are the same the procedure for dealing with
ICTA88/S575 (2) is very similar to that for share pools described
in
VCM47150.
STEP 1
Compute the allowable loss in the normal way. The rules in
ICTA88/S575 (2) only apply to identify the loss that qualifies for
VC loss relief. Any loss that does not qualify for VC loss relief
will be available as a capital loss.
STEP 2
Identify the qualifying and non-qualifying shares included in
the disposal. If necessary apportion the old and new shares
involved in a share reorganisation on a just and reasonable basis,
TCGA92/S52 (4). This will normally be pro rata to the number of
shares disposed of using the formula:
| Number of shares disposed of x | Qualifying shares involved in share reorganisation |
| Total shares involved in the share reorganisation |
STEP 3
Compute the amount of the loss arising on the qualifying
shares on a just and reasonable basis. This will normally be pro
rata to the number of shares disposed of using the formula:
| Total loss x | Qualifying shares included in disposal |
| Total number of shares disposed of |
STEP 4
Compare the figure in Step 3 with the amount actually paid
for the new shares. The VC loss relief available is limited to the
lower figure. Where there have been part disposals of the new
shares keep a cumulative record of the VC loss relief allowed to
make sure that no more than the total new consideration given is
relieved. You will probably need to ask the Office dealing with the
company’s liabilities whether the company would have been a
qualifying company (see
VCM45300) at the time of the
reorganisation.
