As the recession took its toll, a number of companies fell into administration, never to emerge, and are now approaching the point where they will be struck off.

The only remaining crumb of comfort for many investors is that capital gains tax loss relief will be available. Losses can arise when:

• the shares are actually disposed of; or
• the company is struck off because at that point company ceases to exist and the shares are, in effect, disposed of; or
• the share value becomes negligible without the company being liquidated, in which case there may be no actual disposal but a loss can be claimed as if the shares had been sold and reacquired for the negligible value.

Losses can be claimed after striking-off

We have seen it suggested that, once a company has been struck off, it is no longer possible to claim relief for a loss on its shares. That is not correct. While it is not possible to claim relief for a share becoming of negligible value if the claimant no longer owns the share, striking-off creates a deemed disposal under section 24 (1) of the Taxation of Chargeable Gains Act 1992 which says that 'the occasion of the entire loss, destruction, dissipation or extinction of an asset shall, for the purposes of this Act, constitute a disposal of the asset'. A claim on the basis of loss, destruction or dissipation is not the same as a claim that the asset’s value has become negligible. If the asset has not been totally lost, destroyed or dissipated it can still exist in the ownership of the claimant and a negligible value claim remains possible.

Time limits for making claims

For a loss made on an actual disposal, the time limit for claiming the loss is four years after the end of the year in which the disposal took place. The same rule applies to a loss claimed on the basis of the total loss, destruction or dissipation of the asset.

For losses on assets that become of negligible value, the date of claim fixes the deemed date of disposal: the date of loss can be either the date of the claim or any date within the two years before the claim. This effectively amounts to an administrative convenience for HMRC who are not dragged into considering claims going back too far, perhaps to a time when the information available might not be complete. In any case, the asset’s value must have become negligible on or before the date specified in the claim.

Always take advice

Like many aspects of tax this is an area that contains many complexities and traps for the unwary: if in doubt, seek competent professional advice.