VCM74035 - Share Loss Relief: individual and corporate claimants: individual claimants: limit on income tax reliefs

For capital losses made in the tax year 2013-14 and later years, Share Loss Relief is subject to the ITA07/S24A rules limiting income tax reliefs introduced in FA13. For an overview of these rules, see Helpsheet 204.

This means that the Share Loss Relief, aggregated with all other specified reliefs, is limited to a maximum of £50,000 or, if greater, 25% of the taxpayer’s “adjusted total income” for the tax year.

Limit does not apply where EIS/SEIS relief attributable ITA07/S24A(7)(d)

Not all Share Loss Relief claims are subject to the limit on income tax reliefs. Shares to which EIS or SEIS relief is attributable are exempt. Share loss relief on such shares may be claimed up to the full amount of the allowable capital loss incurred, subject to the usual qualifying conditions.

Mixed holdings: identifying shares to which EIS/SEIS relief is attributable

If a Share Loss Relief claim is made on the disposal of a mixed holding of shares which includes shares to which EIS and/or SEIS relief is attributable and shares to which neither is attributable, the identification rules in ITA07/S148(3)(b) apply to identify those shares to which the income tax reliefs limit applies. See VCM75440.

Limit where claim made against income of 2012-13 for allowable loss of 2013-14: transitional rules

The limit on reliefs applies to allowable losses made in 2013-14 and later years. Consequently, though an individual can make a claim in 2012-13 for Share Loss Relief on the full amount of an allowable loss arising in that year, any claim for Share Loss Relief for a loss of 2013-14 (VCM74030) is limited by the limit on reliefs to a maximum of £50,000 or, if greater, 25% of their adjusted total income for 2012-13.

Examples

Example 1 - Share Loss Relief claimed against income of 2013-14

An individual has adjusted total income in 2013-14 of £300,000 and capital losses qualifying for Share Loss Relief of £100,000. No other income tax reliefs are in point.

The relief limit for 2013-14 in respect of the 2013-14 loss is the greater of

  • £50,000, and
  • 25% of adjusted total income: 25%*£300,000 = £75,000

So the relief limit for 2013-14 is £75,000.

Share Loss Relief is potentially available for losses arising in 2013-14 of £100,000, but the amount of Share Loss Relief that can be given is subject to this limit.

Share Loss Relief of £75,000 is given against income in 2013-14. The balance of the losses (£25,000) can be carried forward to set against future capital gains.

Example 2 - Share Loss Relief claimed against income of 2013-14 on a mixed holding including shares to which SEIS relief is attributable

An individual has adjusted total income in 2013-14 of £300,000 and capital losses qualifying for Share Loss Relief of £190,000, of which £90,000 arose on shares to which SEIS relief is attributable. No other income tax reliefs are in point.

The relief limit for 2013-14 in respect of the 2013-14 loss is the greater of

  • £50,000, and
  • 25% of adjusted net income: 25%*£300,000 = £75,000

So the relief limit for 2013-14 is £75,000.

Share Loss Relief is potentially available for losses arising in 2013-14 of £90,000 on shares to which SEIS relief is attributable and £100,000 on other qualifying shares. The amount of Share Loss Relief that can be given on the shares to which SEIS relief is attributable has no limit. The limit applies only to the losses on the other qualifying shares.

Share Loss Relief of £165,000 is given against income in 2013-14:

£90,000 in respect of allowable losses on shares to which SEIS relief is attributable, to which the limit does not apply, and £75,000 in respect of allowable losses on other qualifying shares, which are subject to the limit on income tax reliefs.

The balance of the losses (£25,000) can be carried forward to set against future capital gains.

Example 3 - transitional rules: Share Loss Relief claimed against income of 2012-13

This example illustrates the transitional rules where Share Loss Relief in respect of two years is claimed against the income of 2012-13.

An individual has adjusted total income in 2012-13 of £300,000 and in 2013-14 of £nil. They have capital losses arising in 2012-13 of £100,000 and capital losses arising in 2013-14 of £100,000. The capital losses qualify for Share Loss Relief. No other income tax reliefs are in point.

The relief limit for 2012-13 in respect of the 2013-14 loss is the greater of

  • £50,000, and
  • 25% of adjusted total income: 25%*£300,000 = £75,000

So the relief limit for 2012-13 is £75,000.

Claims to Share Loss Relief are made in respect of both losses against income of 2012-13.

Relief of £175,000 is given against income in 2012-13:

£100,000 in respect of allowable losses in 2012-13, to which the limit does not apply, and £75,000 in respect of allowable losses in 2013-14, which are subject to the limit on income tax reliefs.

The balance of the 2013-14 losses (£25,000) can be carried forward to set against future capital gains.