How to Make a Negligible Value Claim for Worthless Shares

Taxpayers who hold assets that have become effectively worthless and want to understand how a negligible value claim can allow them to realise a capital loss without disposing of the asset.

In some situations, assets lose most or all of their value but are not formally sold or disposed of. Without a disposal event, taxpayers may be unable to claim a capital loss.

A negligible value claim allows a taxpayer to treat an asset as disposed of and reacquired for Capital Gains Tax (CGT) purposes. This can create a capital loss that may be used in the calculation of taxable gains in a Self Assessment return.

If an asset becomes of negligible value, HMRC may allow a taxpayer to make a claim to treat the asset as disposed of and immediately reacquired at its negligible value.

This allows the taxpayer to realise a capital loss even though the asset has not actually been sold.

What Is a Negligible Value Claim?

A negligible value claim is a claim made to HMRC stating that an asset has become of negligible value.

Where HMRC accepts the claim, the asset is treated for tax purposes as if it has been:

• Disposed of at its negligible value, and
• Immediately reacquired at the same value.

This treatment creates a capital loss that may be used for Capital Gains Tax purposes.

When HMRC Accepts a Negligible Value Claim

HMRC may accept a negligible value claim where an asset has become effectively worthless, even if the taxpayer continues to own the asset.

For a claim to be valid:

• The asset must have become of negligible value.
• The asset must still be owned by the taxpayer at the time the claim is made.
• The asset must have previously had a measurable value.

The claim does not require the asset to be sold or formally disposed of.

Assets That May Qualify

A negligible value claim can apply to chargeable assets that have become effectively worthless.

In practice, this commonly includes:

• Shares in companies that have collapsed or ceased trading
• Certain securities or investments

However, the rules are not limited to shares and may apply to other qualifying chargeable assets where their value has become negligible.

HMRC Negligible Value List

HMRC publishes a negligible value list which identifies certain quoted shares that HMRC accepts as having become of negligible value.

Where a company appears on this list, taxpayers may be able to make a negligible value claim using the date specified by HMRC.

The list is intended to assist taxpayers in determining whether shares may qualify for a claim.

Backdating a Negligible Value Claim

In some cases, a negligible value claim can be backdated.

A claim may be backdated to a time when the asset first became of negligible value, provided this falls within the permitted time limits.

This may allow a capital loss to be recognised in an earlier tax year where the conditions are satisfied.

Making the Claim

A negligible value claim is normally made through the taxpayer’s Self Assessment tax return.

The claim should include details of:

• The asset concerned
• The date it became of negligible value
• The relevant value used for the claim

HMRC may request information or evidence supporting the claim where necessary.

Real-World Application

An individual purchased shares in a company that later ceased trading and became insolvent. Although the shares have not been sold, they now have negligible value. The taxpayer makes a negligible value claim so that the shares are treated as disposed of and reacquired at their negligible value, creating a capital loss that may be used against other capital gains.

Risks and Compliance Considerations

• The asset must genuinely be of negligible value for HMRC to accept the claim.
• The asset must still be owned at the time the claim is made.
• Incorrect claims may be challenged if the asset still has measurable value.
• Supporting information may be required where HMRC reviews the claim.

Considering Whether a Negligible Value Claim Applies?

If you hold assets that may have become negligible in value, reviewing the position before completing your Self Assessment return can help ensure that any capital losses are recognised correctly.

Contact CIGMA Accounting if you need guidance on whether a negligible value claim may apply to your situation.