Negligible loss claim against and EIS investment

vandenm

Hi

I would like to make a negligible loss claim against an EIS investment I made in 2012. The company has made no profit in this time.

I am a higher rate taxpayer on a PAYE with circa £20k at 40% rate per year

Example:
Investment £100k
Tax relief of £30k
Net investment £70k
Loss relief £28k (40% of the £70k net investment using marginal rate)
Total loss £42k

If I claim back through income tax over two years, do I use my marginal rate over the whole claim of £70k (as shown above) even though I would only have paid £40k at the higher rate over the two-year period?

Is my understanding correct that I can make the whole claim at the marginal rate of 40%?

Dazed_and_C0nfused

You might find this worth a read.

I suspect you will be slightly deflated after doing so though.

https://www.gov.uk/government/publications/negligible-value-claims-and-income-tax-losses-on-disposals-of-shares-you-have-subscribed-for-in-qualifying-trading-companies-hs286-self-assessment-he/hs286-negligible-value-claims-and-income-tax-losses-on-disposals-of-shares-you-have-subscribed-for-in-qualifying-trading-companies-2021

Johnjdc

It's a negligible value claim. What's your basis for believing the asset is of negligible value? I don't think the fact they have made no profit is enough, if they still exist and are planning to do so. Better might be if they have raised more capital at a far lower valuation in order to keep going, you could claim that difference and the resulting dilution as your loss.

vandenm

Johnjdc - You are absolutley right, negligible value claim, a typo on my part.

D&C - I've come accroos that but read elsewhere sugesting the the marginal rate is used for the whole loss relief so would be good to hear from others.

masonic

There is no loss relief under a negligible value claim unless the shares have negligible value. If the company is still trading then the shares will still be worth something. There are plenty of publicly traded companies that have never made a profit, yet have a non-negligible share price. Unlisted company shares are not valued by a market, but will still have some non-negligible value provided it has the ability to continue as a going concern.

Your opening post suggests the company is still active, so its shares are unlikely to be worth "next to nothing" as required by the guidance and therefore you will not be eligible for the relief. You'll probably need to wait until it actually fails.

This is all covered in the link Dazed has posted, but perhaps it wasn't clear enough.