Claiming a loss on share sale

Glen_Clark

I understand if you sell shares at a loss, you can write to IR and tell them, then claim the loss against gains made in future tax years.

Their website says 'You don’t have to report losses straight away - you can claim up to 4 years after the end of the tax year that you disposed of the asset.' https://www.gov.uk/capital-gains-tax/losses

But does that mean you have 4 years to write to them?
or that you can only claim losses made in the last 4 tax years?
If not then how many years can you go back to claim losses?

Lokolo

I think 4 is the maximum.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/323538/hs227.pdf - altho this is the 13/14 guide.

Page 4

Carry forward against future profits. You can carry your loss forward to set against future profits from the same trade. You must deduct the loss from your profits in the first and each
subsequent profitable year until it is used up. Enter in box 35 on the short pages, box 80 on the full pages or box 24 on the
Partnership pages the amount of your 2013–14 loss that you want to claim in this way. Include the amount of any losses you made in 2012–13 and earlier years which you have not yet used.
The time limit for a claim is 5 April 2018.

So year ending 2014, you have until end of 2018 to claim losses.

Edit - that may not be the correct guidence note...

chris_m

Lokolo wrote: »

I think 4 is the maximum.
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/323538/hs227.pdf - altho this is the 13/14 guide.

Edit - that may not be the correct guidence note...

Since it only refers to trades, professions and vocations, and makes no reference to shares, I very much doubt that it is.

If it does include shares it makes no sense whatsoever, since how can one make a future gain from the same (share) trade in which one made a loss?

badger09

I absolutely hate the dumbed down guidance on tax (and other matters) on the Gov.uk website :mad:

Unless legislation has changed dramatically in recent years, and it may very well have done , you must notify HMRC of the loss, within 4 years after the end of the tax year in which you made the loss.

There is then no time limit on using the loss.

badger09

Perseverance pays


http://www.hmrc.gov.uk/manuals/cgmanual/CG13750.htm

Biggles

For your peace of mind, it's worth claiming losses, every year that you have them, at the end of each tax year. You never know when they might be useful to you and they will then always be available.

Glen_Clark

badger09 wrote: »

Perseverance pays


http://www.hmrc.gov.uk/manuals/cgmanual/CG13750.htm

This is what I found confusing. When they say
'The time limit for claims is ... 4 years'
Do they mean the time limit for claims is 4 years, as in claiming the loss to offset profits in future years, or just the time limit for notifying them of the loss is 4 years, and there is no time limit for claims

bowlhead99

The 'claim' is the action of you telling HMRC that you made a loss. For people filling out tax returns, HMRC will see that you made a loss. For people not filling out tax returns, you need to claim to them that you made a loss, and as with any claims they can presumably challenge it if they like. That is why you have to tell them within 4 years of it happening.

Once they know that you have a loss, because you 'claimed it', you can use that loss whenever you need it, all the way into the future. That is to say, if you have £10k of losses, and then in 2025/26 you have £15k of gains but the annual exempt amount is £13k, you have £2k of remaining gains, so can use £2k of previous year's losses: resulting in you carrying forward £8k of the gains to 2027 and beyond.

So, you don't need to claim to use a loss (i.e. set it off against a gain), as allowable losses are deducted automatically. But you do need to claim that the loss exists in the first place

If you made £15k of gains in a year and £14k of losses in the same year the net amount is £1k of gains which is covered by the annual exemption so in that case you won't have any gains to pay tax on. You also won't have any 'current year' losses to carry forward, because the £14k of losses all got used up before you could start to use the exemption, and the exemption doesn't carry forward. However, in that example you wouldn't need to 'use up' any previous-year losses either, because as long as you tell them about the current year losses, those current year losses and the exemption cover your entire liability.

For HMRC links you might be a bit confused on Badger's link because it's simply an area of the site that deals with 'claims' and you don't have context to know what a claim is.

You would be better going to the losses section of the manual http://www.hmrc.gov.uk/manuals/cgmanual/cg21520.htm and hitting 'next' or 'previous' a few times to read around it. On 21510 for example it mentions my bit above about not having to claim for set-off of losses, but having to claim that the losses are allowable. And on 21530 it says

You must add together the allowable losses in the year of assessment and deduct them from the total chargeable gains of the year. Allowable losses which cannot be set against gains of the same year of assessment are carried forward and set against gains which arise in the future. But see CG15813 about the need, under Self Assessment, for taxpayers to claim that losses are allowable.


You utilise losses brought forward only if net gains (that is, total gains less total losses of the year) exceed the annual exempt amount for the year. Any losses brought forward which are not utilised are carried forward and set against future gains.

That quote is basically telling you why the reference Badger gave exists, because there are rules about claiming losses and making sure they are allowable; but there is nothing to say that once a claim is allowable to carry forward to future years, it would only last a certain amount of time. It could be a decade before you actually need that loss that you 'banked'.

To use the popular metaphor: "Simples!"*



*If you're a qualified accountant, it would probably feel simpler.