Have you sold shares at a loss that you subscribed for in an unquoted company. Alternatively, do you still own the shares but they are valueless. Either way, the Capital Loss may be used to reduce your income tax liability.

Income tax relief can be available where a Capital Loss has been made on the disposal of shares that you subscribed in a company, as opposed to buying from someone else.

It is also possible to generate a loss for capital gains tax purposes in situations where the shares have not actually been disposed of. The mechanism for this is via a ‘negligible value claim.’ The shares must have become of negligible value since you acquired them and had a non-negligible value when acquired.

It does not matter when the asset became of negligible value, only that it is of negligible value on the effective date of the claim.

There is no official definition of ‘negligible value’ for these purposes but would include shares in an insolvent company.

Following the making of a negligible value claim, the asset is treated as having been disposed of for the specified amount, which can be nil, and then immediately reacquired for that same value. This effectively creates a loss while allowing you to retain the asset.

If the shares for whatever reason increases in value, the full proceeds will potentially then be subject to capital gains tax.

There are various options for how you offset the income tax loss against your other income. Any amount of the loss which cannot be relieved in this way will remain a capital loss and be set first against any gains of the same year, before being carried forward against gains of later tax years.