If you’re an SME owner or investor, the chances are that you’ve put money into a business venture at some point; your own, perhaps, or a friend’s, or a promising start-up you backed. Not every bet pays off. When a company you’ve invested in ends up in dire straits and your shares are worth next to nothing, it can feel like the money is simply gone, with a tax bill for previous gains still hanging over you.
On the positive side, you don’t need to find a buyer for worthless shares to turn that loss into a tax saving. HMRC has a mechanism, known as the ‘negligible value claim’ that lets you crystallise a capital loss while still holding the shares.
Nobody wants your shares
Normally, a capital loss for tax purposes only arises when you actually dispose of an asset. But if your shares are in a company that has collapsed, is dormant, or is on the brink of insolvency, finding a buyer at any price is often impossible. Without a sale, you’re stuck holding a loss you can’t use.
Negligible value claims
If you can demonstrate that your shares have become of negligible value since you acquired them, you can make a claim to HMRC to be treated as if you’d sold and immediately reacquired them at that negligible value. This “deemed disposal” crystallises a capital loss that you can then set against other capital gains, but without you losing ownership or control of the shares.
You can make this claim either through your Self-Assessment tax return or by writing directly to HMRC. HMRC publishes a list of quoted shares it already accepts as being of negligible value, which can make the process quicker for listed companies that you may have purchased shares in. Take a look at the link and see if you still own shares in any of these companies.
Example
Sarah, who runs a marketing agency, invested £15,000 in a tech start-up five years ago. The company has since stopped trading, and the shares are effectively unsellable. Rather than writing the investment off and forgetting about it, Sarah can make a negligible value claim, generating a £15,000 capital loss that she can use (offset) against other gains.
Timing is everything
One of the most valuable features of a negligible value claim is the flexibility over when the loss is treated as arising.
You can backdate the claim to any date up to two tax years before the start of the tax year in which you actually make the claim, provided the shares were also of negligible value on that earlier date. This means a claim made now, in 2026/27, could potentially be backdated to 2024/25. That might suit you if, for example, you had capital gains in 2024/25.
Example
Suppose that in 2024/25 you had sold a rental property and made a taxable gain of £50,000 paying capital gains tax at 24%. So, you’d have paid CGT of £12,000.
You had invested £30,000 in shares in a company many years ago which are now worthless. So, you make a negligible value claim but decide to carry it back two years to 2024/25. You can now (retrospectively) offset the £30,000 against the £50,000 gain, reducing it to £20,000 and receive a refund of 24% on the £30,000 (£7,200).
The catch
A negligible value claim only works while the shares still legally exist. Once a company is formally dissolved or struck off the register, the shares cease to exist, and a negligible value claim is no longer available. Instead, the capital loss simply arises automatically on the date the company is struck off or liquidated. If you’re weighing up whether to let a dormant company be struck off, or keep it alive a little longer, this timing point is worth discussing with eba first.
Unquoted shares – an even better outcome
If you subscribed for shares directly from an unquoted trading company (rather than buying them second-hand or via a stock exchange), there’s a further option. The loss can potentially be set against your income rather than capital gains.
Since income tax rates are generally higher than CGT rates (top rate of 45% rather than 24%), offsetting against income usually produces a larger refund. This relief can be claimed against income in the tax year the loss arises, or the preceding tax year, giving you further planning flexibility.
Example
James subscribed for £20,000 of shares when a friend’s manufacturing start-up was founded. The company has since become insolvent. Because James subscribed for genuinely unquoted trading company shares, rather than buying them from someone else, he may be able to set the loss against his income tax bill instead of just his capital gains, potentially saving tax at 40% or 45%, rather than the CGT rate.
The takeaway
A failed investment doesn’t have to be a total loss for tax purposes. If you’re holding worthless or near-worthless shares, get in touch with us before assuming there’s nothing to be done. Depending on how and when you invested, a negligible value claim could unlock a valuable refund – sometimes for a tax year you thought was long closed.
