Negligible value claims

March 2010

HMRC define an asset to be of negligible value if "it is worth next to nothing".

If you make a formal negligible value claim, the effect is to treat the asset as sold and immediately reacquired at a nil value, thereby creating a capital loss.

Interestingly you can specify a time in the previous two tax years at which the deemed disposal should be treated. Obviously you will need to prove that negligible value applied at the earlier date.

Accordingly any claim you make in 2009-10 could be treated as made in 2007-08 or 2008-09.

The claim creates a capital loss. However, if the asset is shares that you have subscribed for in a qualifying trading company, it is possible to claim to convert the capital loss into an income loss that can be set against any other income.

This is a useful way to recover some of your investment if a company in which you own subscriber shares becomes dormant for any reason and you have no prospect of recovering the cash you have tied up in share capital.

Subscriber shares are shares you acquire from the company and not shares transferred to you by previous shareholders.