If a disposal includes shares that do and shares that do not
qualify for VC loss relief under ICTA88/S574 you have to apportion
the allowable loss to determine the VC loss relief available. The
effect of pooling shares is that the cost of all the shares is
averaged. You cannot simply take a proportionate part of the loss
equal to the proportion of qualifying shares disposed of.
ICTA88/S576 (1) provides that the amount of VC loss relief shall
not exceed the amount that would have been deductible if the shares
had not been part of a holding. For this purpose ICTA88/S576 (5)
provides that a ‘holding’ means any number of shares of
the same class in the same company held by one person in one
capacity, not necessarily a TCGA92/S104 holding or a 1982 holding
as referred to in
VCM47050.
Example
An investor’s holding of shares in A Ltd comprises 100
shares acquired by subscription for £100 and another 100
shares purchased for £300. The total holding is 200 shares
costing £400 and the average cost of each share is £2. If
all the 200 shares are sold for £0.25 each the total allowable
loss will be £350. Although half the shares held might qualify
for VC loss relief as shares acquired by subscription, the relief
potentially due is
not half of £350. If the qualifying shares
had not been part of a holding the amount deductible in computing
the loss would have been only the £100 consideration given for
them. This is the maximum amount of VC loss relief available.
Effectively the relief is restricted to the allowable cost of the
qualifying shares, or their value on 31 March 1982 if they were
held then and a valid rebasing election has been made (see CG16700
onwards).
