Increase Tax Relief Using Negligible Value Claims

As the country begins to reopen following the COVID lockdown, the economic damage of the pandemic is likely to become more apparent. Unfortunately, there will be many businesses that will not recover even as the country gets back on its feet.

Not that there is any real silver lining to what has happened, at least there could be some special tax relief available if relevant conditions are met.

In particular for those businesses and business owners a negligible value claim may be an option to help reduce their tax liability.

As the name suggests, a negligible value claim is a specific claim made where an asset, which is still retained, has lost the vast majority of its value and hence is worth next to nothing. The claim has the effect of treating you as having disposed of an asset for current market value even though you remain the owner.

Assets for which a claim can be made include:

  • Quoted Shares
  • Unquoted Shares
  • Buildings and structures
  • Goodwill

Depending on the type of asset will depend on what supporting information is needed to successfully demonstrate a claim to HMRC.

If you find yourself with an asset of negligible value, a claim can be made as part of your 2020/21 tax return. This may reduce your capital gains tax liability for the year or carry forward a capital loss for future years. Perhaps more importantly, in some circumstances this can even generate an income tax loss with greater potential for immediate tax refunds.

If you wish to discuss the possibility of making a claim please contact the Elman Wall Tax Team on 0207 600 5667 or William Singleton at william.singleton@elmanwall.co.uk

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