CG13150 - Introduction and computation: occasions of charge: assets lost/destroyed/negligible value: practical considerations

Bargain made not at arm’s length

It may be worth looking at the case in some detail if the claimant has subscribed for further shares shortly before the date on which the shares are claimed to have become of negligible value.

You should remember that if the transaction is not a bargain made at arm’s length, then either

• s17 TCGA92 (see CG14540 onwards), or

• s128(2) TCGA92 (see CG51820+), or

• s251(3) TCGA92 (see CG53510 onwards)

may apply to restrict the acquisition cost of the new shares.

Companies restored to the Companies House register

You may come across a case where a company has been struck off the register at Companies House. A person can, however, apply for a court order for a company to be restored to the register under s1029 Companies Act 2006 (CA06). If the application is successful then s1032 CA06 applies:

“(1) The general effect of an order by the court for restoration to the register is that the company is deemed to have continued in existence as if it had not been dissolved or struck off the register.

(3) The court may give such directions and make such provisions as seems just for placing the company and all other persons in the same position (as nearly as may be) as if the company had not been dissolved or struck off the register.”

HMRC interprets s1032 CA06 to mean that both the company and the share capital of that company are deemed to continue existing in the period between dissolution and restoration. The holder or holders of the share capital immediately prior to dissolution are deemed to have continued to hold the shares in the period between dissolution and restoration.

When a company is struck of the register at Companies House, the share capital of that company ceases to exist. As the shares are no longer held, a negligible value claim cannot, therefore, be made. Instead, the holder or holders of the share capital can make a claim that the shares were actually lost under s24(1) TCGA92 (see CG13120).

The effect of s1032 CA06 is that the shares cannot be claimed to have been lost or destroyed so the claim under s24(1) TCGA92 cannot succeed. However it may be possible for a successful negligible value claim to be made in relation to the shares so long as the company is actually restored to the register and s24(2) TCGA92 is satisfied (see CG13125 onwards).