Assets of negligible value

Produced by Tolley

The following Personal Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Assets of negligible value
  • Negligible value claim
  • Effect of the claim
  • When is the loss effective?
  • Proof required
  • Assets acquired from a spouse or civil partner
  • Particular types of asset
  • Buildings
  • Goodwill
  • Partnership goodwill
  • More...

Generally, a taxpayer can only claim a capital loss in respect of an asset where that asset has been subject to disposal or has been destroyed completely.

If the asset has simply become worthless (of negligible value), but continues to exist and be held by the taxpayer, there is no capital loss under the normal rules, but a claim may be made asdescribed in this guidance note. Negligible value claims are most commonly made in relation to shareholdings, although other types of assets are considered below.

For other commentary on assets becoming of negligible value, see Simon’s Taxes C1.321 and C1.506.

Negligible value claim

The taxpayer may make a claim under TCGA 1992, s 24(2) for an asset, which they own at the time of the claim, to be treated ashaving been sold and immediately reacquired at the value specified in the claim. The amount specified will normally be the market value of the asset and, in many instances, that value will be zero.

The reason behind the negligible value claim is to allow a taxpayer to realise losses on assets which they would otherwise be unable to sell because those assets have become worthless during the period of ownership.

Effect of the claim

A capital loss arises at the date of the deemed disposal (ie the date of the claim). Assuming that the asset is completely worthless, the capital loss is equal to the original base cost.

The taxpayer’s base cost of the asset for capital gains tax purposes going forward is nil. Thus, if the value of the asset recovers in the future and the asset is sold, that entire value will be taxed asa gain.

If unquoted shares in a trading company have become of negligible value, it may be possible to make a claim for share loss relief to set the loss against the taxpayer’s income instead of against capital gains. Where this is possible, the taxpayer needs to make two claims: a

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