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Where Taxpayers and Advisers Meet

Loss on shares as income loss

simplytax
Posts:86
Joined:Wed Aug 06, 2008 3:34 pm
Loss on shares as income loss

Postby simplytax » Fri Jan 28, 2011 8:26 pm

Under s131 ITA 2007 a loss on shares in an unquoted trading company can qualify as an income loss.

What is a qualifying trading company ?

Is the company required to have been trading or is it sufficient that it was set up to trade and had incurred initial costs and professional fees etc but had not been succesful in acquiring an asset that was to be the basis of its trade ?

s137 ITA 2007 refers to the company "...exists wholly for the purpose of carrying on one or more qualifying trades"

If existed for the purposes of carrying on a trade but was not successful in obtaining a licence over an asset to enable it to actually carry on a trade is it a qualifying company ?

This is in contrast to claiming relief for irrecoverable loans to taders under s253 TCGA where the company does actually require to have traded.

Has anyone argued for this or had a problem with HMRC accepting that ok if purpose was to carry on a trade despite no income ever generated ?

pawncob
Posts:5090
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Loss on shares as income loss

Postby pawncob » Fri Feb 04, 2011 6:37 pm

See "Do all trading companies qualify" in the PDF. Presumably the same definition applies.

http://www.hmrc.gov.uk/helpsheets/hs286.pdf
With a pinch of salt take what I say, but don't exceed your RDA

mullet
Posts:3242
Joined:Fri Nov 06, 2009 9:26 am

Re: Loss on shares as income loss

Postby mullet » Fri Feb 04, 2011 10:48 pm

Is the company required to have been trading or is it sufficient that it was set up to trade and had incurred initial costs and professional fees etc but had not been succesful in acquiring an asset that was to be the basis of its trade ?
Given that there are rules such as a requirement to have traded for 6 or more years or for the life of the company if shorter, and that relief is due if cessation of trade is not more than 3 years before disposal ... add that to the term "carrying on a trade" and I would say that it is essential for the company to have actually traded.


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