By Ruari Peoples, Trainee Solicitor

A Problem 

Jane buys shares in Company A for £1000. Unfortunately, Company A later has financial difficulties and goes into liquidation. Jane’s shares become worthless, causing her a real-world financial loss of £1000. Nobody wants to buy Jane’s shares (even at a reduced price), so she cannot sell them at a  loss to set against the capital gains she makes from her other assets for the purpose of determining her capital gains tax liability. 

Given the current difficult economic climate, Jane’s predicament may become increasingly common. 

Fortunately, there is a solution to this problem – a negligible value claim.


Negligible Value Claims 

A negligible value claim can be made where an asset becomes of negligible value while an individual owns it. HMRC defines an asset as of ‘negligible’ value where it is ‘worth next to nothing’. In other words, the asset must become practically worthless.  Whilst the above example relates to shares, this can also apply to other assets. 

In addition, the individual must still own the asset at the time the claim is made, which means it must still exist. For Jane to make a claim she needs to do so before Company A is dissolved and the shares cease to exist. 

A successful negligible value claim results in the asset being treated as having been sold for its current market value (which will be zero, or close to zero, for a practically worthless asset) and immediately reacquired by the individual for the same value. The effect of this deemed disposal is to produce a capital loss equivalent to the amount the asset cost the individual to acquire. This loss can then be used to offset any capital gains the individual makes on their other assets. 

In Jane’s case, a successful claim would result in a deemed disposal of the shares for £0, producing a capital loss of £1000 on the shares, which she can then use to reduce her tax liability on the capital gains she makes from her other assets. 

In certain instances, there may be scope to set this loss against taxable income instead (for example, where the shares in question were EIS shares or shares in a qualifying trading company).



The deemed loss can be used to offset capital gains made in the current tax year in which the claim is made. Alternatively, the individual can specify that the loss be treated as having arisen at a date within either of the two tax years preceding the year in which the claim is made, so long as: 

  • the individual owned the asset at the earlier date and still owns it at the time of the claim;
  • the asset was of negligible value at the earlier date and remains of negligible value at the time of the claim.

 This gives an individual flexibility to offset gains made in previous tax years if they choose.



Negligible value claims are an important tool to help mitigate the adverse tax consequences of an asset becoming worthless. Jane’s shares may have lost all value, but by making a claim she has reduced her tax bill. All taxpayers should be aware of the potential advantages of a negligible value claim so they do not miss out on the relief available.