Mark Herson, a director at James Cowper, said: “Investors who own shares in MFI, Woolworth or, indeed, any company entering formal insolvency proceedings are unlikely to see any of their original investment back. But in the immediate disappointment at losing their money there is a tendency to overlook the tax position and potentially be left even further out of pocket.”
Investors who have lost money through their investments are entitled to claim tax relief on their losses from HM Revenue and Customs and to reclaim any overpaid tax.
“Losses on investments can be set against any capital gains made in the same tax year or carried forward to offset against future capital gains,” adds Mark.
For shares in companies which are no longer trading but have a negligible value, a capital loss can be claimed equal to the cost. Any capital losses need to be claimed within five years and 10 months after the end of the tax year in which they occurred.
And recouping tax losses can apply to investments in a private-owned company too. Mark says: “In such instances it might be possible for the loss to be claimed against income rather than capital gains, but a claim would need to be made within one year and 10 months from the end of the tax year in which the loss occurred.”
Investors who believe they are eligible to claim tax relief against losses are urged to take professional advice. This will help ensure that the maximum amount of tax is reclaimed as quickly as possible.
“Obviously,” says Mark Herson, “this is small consolation for what might be very sizeable losses on investments in a company. But in our current economic climate, it really is true that every little helps.”
