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Saving up "negligible value" losses

CGT losses are - of course - normally available for offset against gains of the year in which the loss arises or subsequent years. But in some cases a loss can be offset against income - notably a loss on subscribed-for shares in certain trading companies (s131 relief, previously s574 relief).

Any loss will arise when there is a disposal - either an actual one or a deemed one (as for example on a claim that shares have become of "negligible value"). The point to remember is that a negligible value claim does not have to be made as soon as the shares are in fact of negligible value: it is possible to defer making the claim (and therefore crystallising the loss) until a year when the loss can be most profitably used. Specifically, you might in some circumstances want to defer making the claim until after 5 April 2010 in order to set the loss against income taxed at 50%. Why cash in a loss for 40p in the pound this year if you can cash it in next year for 50p in the pound?

One caveat: remember that if an asset is lost destroyed dissipated or extinguished (as for example happens to shares when a company is struck off), that event constitutes a disposal whether or not you've made a "negligible value" claim. So, deferring recognition of a loss by holding off on your negligible value claim on your shares works only for so long as the company remains in existence.

For further advice on this and other tax planning hints, contact help@bkltax.co.uk or your usual consultant.