Share Loss Relief in EIS shares that were gifted

Hi I bought some EIS shares in 2011 and available tax reliefs. I gifted the shares to my daughter in 2013 and made the necessary calculations to record this at the then full market value and made the necessary calculations for withdrawn income tax relief and revived capital gains reversing the earlier tax relief I had received. I am now making a Negligible Value Claim (NVC) on behalf of my daughter as the shares are now worthless after the company failed. I realise my daughter can claim a Capital Loss equivalent to the NVC, but could she alternatively claim Share Loss Relief against her income tax? The shares were transferred to her at full market value in 2013 and I am not sure if gifts made then we’re eligible for Share Loss relief?

Hi Steve Fernback,
You will need the market value of the shares at the time the gift was made.  This woud be used to calculate the loss arsing from the NVC.  The NVC should be included in the unlisted shares and securities.  You will need to include 'NVC' under other claims and elections.  The loss can be used against income in the tax year the NVC occurs.
Thank you.

Hi thank you for the reply I was querying this because I had read somewhere in another tax forum you could not claim share loss relief in gifted shares however it did not make clear if this was loss relief for the donor or donee. In our case it is the donee who could better use the share loss ( in the year the NVC has been made) relief rather than claiming a Capital Loss, so to be clear can you do this? It seems reasonable to me as the gift was at full market value at the time of making it and so went through the full tax system as if paid for shares. Please just confirm Thankyou

Hi,

That unless EIS relief is attributable to the shares disposed of, a share loss relief claimant needs to have themselves subscribed for the shares that are the subject of the claim. Commentary is provided at this reference which defines a subsription for shares. This emphasises that shares that are acquired by gift will not have been subscribed for and so share loss relief is not therefore available.
An exception to this rule (please see VCM75310) is when shares were subscribed for and subsequently transferred to a spouse or civil partner during their lifetime and they were a spouse or civil partner at the date of transfer. It might also be worth referring, in your reply, to HS286, where the full relevant conditions for a valid claim are set out.

VCM74010 - Share Loss Relief: individual and corporate claimants: individual claimants: method of approach

Thank you.

Thanks very much for the latest reply I have checked the points you highlighted but am still not quite sure in this if When you say “unless EIS share relief was attributable to the shares disposed of……..claimant needs to have themselves subscribed…..” In our case EIS share relief was originally attributed to the shares (though the income tax relief was withdrawn when gifted to the claimant, my daughter) So as the shares had EIS share relief attributed/able can that over-ride the rule that the claimant needs to have subscribed for the shares themselves allowing her to claim income tax loss relief on the shares (following the Negligible Value Claim)?

Hi Steve Fernback,
Please refer to:
VCM15010 - EIS: income tax relief: withdrawal or reduction of EIS relief: overview.
This states that 'The legislation provides for the complete withdrawal of any (EIS) relief attributable to shares if, by reason of some event, any of the conditions for the relief ceases to be satisfied.' When the gifting to the daughter was made, at least one of those conditions for relief was clearly breached and the income tax relief was withdrawn.
From that point, EIS relief was no longer attributable to the shares.
Thank you.