Check of self assessment - Negligable value claim


Check of self assessment - Negligable value claim

Postby tiggy2101 on Tue Jun 30, 2009 11:36 am

I have recently received a "Check of Self Assessment Tax return" letter from HMRC checking into my Negligable value claim for the loss on the value of my Ordinary "A" shares in an unquoted company. The company had been trading for many years and the money went directly into the business as working capital as per the Shareholders Agreement. (It did not go in as a directors loan) I was also became a director of the company. I also followed the HMRC helpsheet and make a few calls to HMRC before submitting my claim on my tax return in November 08. They are now requesting a copy of the share certificate, shareholders agreement, administrator details and the tax office and corporation tax reference number the accounts were filed under. I have all of this information to hand, however, does this mean that my tax return was incorrect or is this a genuine check and tick boxes exercise by HMRC. Any replies would be greatly appreciated.

Kind Regards
Jeff
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Re: Check of self assessment - Negligable value claim

Postby AvocadoK on Tue Jun 30, 2009 12:29 pm

In my experience, it is quite common for HMRC to make enquries into negligible value claims. The fact that they have enquired does not mean they think the claim is wrong. But experience will tell them that claims of this nature very often fail to meet the statutory conditions for relief, and that they are worth checking.

They are fairly standard questions, though I don't recall HMRC asking for share certificates before. Still, it's a reasonable enough request, as are the others.

Very often, the stumbling block is that the shares did not BECOME of negligible value, because they were always valueless. This will often happen when capital has been injected when the balance sheet showed an insolvent position. In such cases, a negligible value claim will fail.

If the negligible value claim fails, it should be possible to claim a capital loss when the company is wound up and dissolved.

AK
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Re: Check of self assessment - Negligable value claim

Postby tiggy2101 on Tue Jun 30, 2009 12:46 pm

many thanks for the response AK
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Re: Check of self assessment - Negligable value claim

Postby tiggy2101 on Tue Jun 30, 2009 1:36 pm

AK thats a very good point you raise about the company's solvency at the point the shares were subscribed for. Having just checked the accounts, I note the company was insolvent at the year ended Sept 01, restructered on the date I acquired my shares in Feb 02. The company became solvent on the date my shares were acquired because the majority shareholder wrote off a large loan resulting in the company becoming solvent on this date (Feb 02).
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Re: Check of self assessment - Negligable value claim

Postby AvocadoK on Tue Jun 30, 2009 10:33 pm

Interesting! I expect HMRC will obtain copies of the accounts from the district that dealt with the company and will draw conclusions from the insolvent balance sheet. You'll therefore need to show that the shares did have value at the time you subscribed for them - so you will need the documentation from Feb '02 dealing with the loan release that occurred just before you bought in. Good luck.
AK
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Re: Check of self assessment - Negligable value claim

Postby tiggy2101 on Wed Jul 01, 2009 9:05 am

Mank thanks AK, I really appreciated your input and the time taken in responding to my query. It does mention on the statutory accounts that the loan was converted to ordinary convertable shares resulting in a solvent balance sheet on the day the shares were acquired, this is also mentioned in the shareholders agreement. The company was also turnng over £7.2 million so I think my £35k investment has value as at Feb02 when I acquired on the shares.

Once again many thanks
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