FA 2020 ― can HMRC limit claims for historic share loss relief and loans to traders?

Produced by Tolley
FA 2020 ― can HMRC limit claims for historic share loss relief and loans to traders?

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

  • FA 2020 ― can HMRC limit claims for historic share loss relief and loans to traders?
  • Introduction
  • Summary of the FA 2020 changes
  • Disposals or loans made before 24 January 2019
  • Corporation tax
  • What does this mean for taxpayers?
  • Protective claims in relation to closed tax years
  • Risk management
  • Taxpayer’s risk
  • Your risk

Introduction

In July 2018, the European Commission formally requested that the UK amend the rules on losses on shares set against income and capital loss relief on irrecoverable loans to traders to ensure that they are compatible with European Union (EU) law.

As the UK Government failed to act within the two-month deadline, the Commission delivered a reasoned opinion to the UK in January 2019. While it was a member state, the UK was required to comply with the reasoned opinion and, if it failed to comply, proceedings would be brought before the Court of Justice of the European Union (CJEU).

Therefore, the Government has changed the law with effect from 24 January 2019 (the date of the reasoned opinion) via FA 2020, ss 27, 38. There had been speculation that the amendments to statute might be dropped once the UK left the EU; however, the clauses were legislated unchanged from the original draft clauses published in July 2019.

This guidance note explains the changes and discusses whether it is possible to make claims for relief in respect of disposals arising or loans made before 24 January 2019. Note that this guidance note has been updated for the Supreme Court decision in FII GLO (No 2), released on 20 November 2020, in which the court overruled the Deutsche Morgan Grenfell decision regarding the time limit for claims where tax has been paid in the mistaken belief that it is due. See ‘Closed years’ below.

The information contained in this guidance note is intended to provide a general outline. You may need to take legal advice based on your client’s particular circumstances.

Summary of the FA 2020 changes

ProvisionRelief availableNon-compliant conditionChange to the lawFurther reading
Losses on shares set against income for income tax purposes (also known as share loss relief)Where capital losses are generated on EIS shares or otherwise qualifying shares in unquoted trading companies, the losses can be

Popular documents