What Investment Reader's Question:

I currently hold shares in an AIM-listed company and was about to sell these to realise losses (to offset against gains elsewhere), but the shares have since been suspended and I think the company is now in administration. The current value based on the suspended price is around £1,400, and the realised losses based on that value would be around £12,000.

The losses are more valuable to me at the moment than the actual value of the shares themselves, and I need those available by the end of this tax year. I assume it’s not possible to roll gains forward?

Is there any way that I can now realise these losses given that I cannot sell the shares? I am wondering if gifting them might be a way of releasing the losses?  I’m thinking perhaps either to my brother (but am not sure what tax implications this might have for him) or to charity (and whether I could then claim tax relief on the value gifted)?
Is any of this possible, or are there any better alternative routes? Any advice would be very much appreciated.

Mrs K Hall

Angus Rigby replies:

First of all, you need to see if the company is indeed in administration. This can be found out relatively easily from HM Revenue & Customs (HMRC), which holds lists of when companies have gone into administration.

HMRC also provides useful information about what you can do in these circumstances, which can be found at www.hmrc.gov.uk/guidance/cgt-introduction.pdf.

Assets that are destroyed or cease to exist – for example shares in a company that is dissolved and removed from, or struck off, the Register of Companies – may be an allowable loss for capital gains tax (CGT) purposes.

However, gifting shares is a chargeable event for CGT purposes if the net gain is in excess of the annual CGT exemption, which is £9,600 for this tax year. According to guidance from HMRC, an asset, such as shares, that is given to a friend or member of your family (other than a husband, wife of civil partner) would typically be treated as making a disposal, and potentially be liable to CGT. In turn, if the other person then disposes of an asset that was gifted to them, they too could be liable to pay CGT (which is worked out based on the market value of the asset when it is received).

However, as the asset in this instance has incurred a loss, there should not be a CGT liability for you, and for your brother it really depends on whether the suspended stock is re-listed and he is then able to sell the shares and make a gain in the future.

It might be possible for you to claim tax relief on the shares if you were to donate them to charity, and how much you can claim depends on your tax status. For example, if you were a 40 per cent taxpayer and gifting shares valued £1,000, you could claim
tax relief of £400.

Ultimately, it is important to remember that each individual’s tax status is different, and it is recommended that you seek advice from a specialist financial or tax adviser to determine the best way to realise the losses for your tax return.