Negligible value claims can be made for unquoted shares as well as shares formerly quoted on the London Stock Exchange that now have negligible value.
Negligible value claims
If you own an asset which has become of negligible value in your ownership then you may choose to make a negligible value claim so that you’re treated as having disposed of an asset even though you remain the owner.
There are special rules that apply when you want to make a negligible value claim for a building or structure. These rules are explained in the Capital Gains Manual CG15770.
You can provide details of your negligible value claim in box 54, ‘Any other information’, on page CG 4 of the Capital Gains Tax summary (SA108) or in your computations included with your tax return.
If you make a competent negligible value claim then you will be treated as though you had disposed of the asset and immediately reacquired it at the time the claim is made for an amount equal to the value which you specified in the claim. That time will be after the year to which the tax return relates.
When you make the claim you may choose to specify an earlier time when you will be treated as though you had disposed of and immediately reacquired the asset. If you want to specify an earlier time then you have to meet all of the necessary conditions to make the claim at the time the claim is made. These are:
- – you must still own the asset when you make the claim
- – the asset must have become of negligible value while you owned it
In addition, you must also meet some further conditions.
- – that you must have owned the asset at the earlier specified time
- – that the asset must have become of negligible value on or by the earlier specified time
The earlier time you choose can be up to 2 years before the start of the tax year in which you make the claim. So, if you submitted your tax return on 31 January 2021 and included a claim with that tax return then you could specify an earlier time from 6 April 2018 to 30 January 2021.
Any delay in making a claim may affect the earlier years which you may specify. So, if you sent in your 2019 to 2020 tax return on 1 May 2021 then the earliest date you could specify for a disposal would be 6 April 2019.
If you make a negligible value claim with your 2019 to 2020 tax return and you want to include the capital loss from any deemed disposal in that tax return then you will need to specify a date in the claim within the period from 6 April 2019 to 5 April 2020 for the deemed disposal. Please note the date you choose could affect your ability to claim some reliefs.
What ‘negligible value’ means
For tax purposes there is no accepted definition of ‘negligible value’, but generally it applies to assets that have become worth next to nothing while someone has owned them.
Assets cannot have been of negligible value when you acquired them, they must have become of negligible value while you have owned them.
How to make a negligible value claim
If you can give evidence to HMRC that shows that your assets no longer have any value since you acquired them, you may be able to make a negligible value claim. You can use this to realise a loss to reduce your Capital Gains Tax liability.
Make a claim by either:
- – writing to your tax office
- – entering a negligible value on your tax return
Your tax office may ask the Shares and Assets Valuation team to consider your claim.
If the company is in liquidation or receivership
You’ll need to give the following information:
- – a statement of affairs for the company and any subsidiaries
- – a letter from the liquidator or receiver showing whether any return will be made to the shareholders
- – details of how this decision was reached (for example, a balance sheet showing significantly more debts than assets)
- – any evidence that no recovery or rescue of the company is likely (for example, a statement that the company has ceased trading)
If the company is not in liquidation or receivership
You’ll need to give full and comprehensive information that shows that the shares or securities have become of negligible value.
Negligible value agreements and claims for previously quoted companies
HMRC publishes a list of shares and securities in companies that were previously quoted on the London Stock Exchange and that have been accepted as being of negligible value.
You can use it to find shares which have been declared as being worth negligible value up to and including 31 October 2023.
You’ll still have to submit your negligible value claim to HMRC if you own shares or securities for a company shown on the list.
A list is not published for:
- – unquoted companies
- – companies formerly quoted on the Alternative Investment Market and PLUS Market
- – non-UK companies
How to use the Negligible Value Agreement list
To check if your shares or securities were quoted on the London Stock Exchange, and have been declared as being of negligible value, select the first letter of the company name in the Negligible Value Agreement list index.
The word ‘security’ represents the ownership interest held by the shareholders in a company, realised in the form of publicly traded stock or shares which includes ordinary shares and preferred stock.
The ‘effective date’ is the date that an agreement or transaction becomes binding, that is the date (or length of time) on which a claim to Negligible Value on the shown security is valid.
The ‘dissolved date’ is the date the company ceased to legally exist. You cannot make a negligible value claim on or after the date the company has been dissolved.
How can MCL Accountants help with your queries on negligible value claims?
Contact MCL Accountants on 01702 593 029 if you have any queries on negligible value claims or if you need any assistance with the preparation and submission of your business accounts or self-assessment tax returns to HMRC.
- REQUEST A QUOTE
Ishan provides financial management, taxation and transactional advice to business entities of all sizes. His expert areas include statutory compliance, business taxation, personal tax & transactional processing and systems. Industry sectors include professional services, retail, hospitality and entertaining & media and advertising services.