Capital losses are normally carried forward and used to reduce future chargeable gains.
However, there is another use of the capital losses.
Relief against total income is available if – the loss arises on the disposal of unquoted trading company shares.
With this claim, the capital loss can be set off against total income of the current year and previous year, this allows the loss to attract tax relief at the higher rates of 45%.
Drey subscribed for 5,000 shares in W Ltd., an unquoted trading company in August 2009 for £3 per share.
On 1 December 2018, the company made major losses and that the shares were now valued at 10p per share.
He has other income of £45,000.
If he sells the shares at the current market value, how can he claim relief for his capital loss?
S.P. 5,000 * 0.1 = £500
Cost 5,000 * £3 = (£15,000)
Capital loss £14,500
Claim against total income of the current year
Total income £45,000
Capital loss (£14,500)
Total income £30,500