How does section 147 limit share loss relief for shares in a section 104 pool?

Section 147 caps share loss relief at the amount of loss that would have arisen if the qualifying shares had been treated separately from the section 104 pool. This prevents relief being inflated by losses attributable to non-qualifying shares aggregated within the same pooled holding for capital gains tax purposes.

What happens to share loss relief when qualifying and non-qualifying shares are acquired on the same day?

Under capital gains tax rules, same-day acquisitions are treated as a single transaction. Section 147 addresses this by limiting share loss relief to the loss that would have arisen if the qualifying shares and the non-qualifying shares had been treated as two separate acquisitions, isolating the relief to qualifying shares only.

How does section 147 apply to share reorganisations involving qualifying shares?

When a share reorganisation causes qualifying shares and other shares or debentures to be treated as the same asset, section 147 restricts share loss relief on any eventual disposal to the loss that would have been calculated had the qualifying shares and other shares not been treated as the same asset.

When are shares without EIS relief treated as incapable of being qualifying shares under section 147?

Shares without EIS relief cannot be qualifying shares if the individual did not acquire them by subscription, or if the company did not meet the qualifying trading company requirement at the time of issue. For reorganisation purposes, shares of a different class from the qualifying shares being disposed of are also excluded.

Income Tax Act 2007 section 147

Limits on share loss relief

Section 147 limits the amount of share loss relief available when qualifying shares form part of a pooled or mixed holding, ensuring that relief is restricted to the loss attributable only to the qualifying shares themselves.

Where qualifying shares form part of a section 104 share pool, the share loss relief is capped at the amount of loss that would have arisen if the qualifying shares had been treated separately from the pool.
Where qualifying shares and non-qualifying shares are treated as acquired in a single transaction on the same day, relief is limited to the loss referable to the qualifying shares alone, as if the two groups had been acquired separately.
Where a share reorganisation has caused qualifying shares and other shares (including debentures) in the same company to be treated as the same asset, relief is limited to the loss that would have arisen if the qualifying shares and the other shares had not been treated as the same asset.
Shares without EIS relief cannot be qualifying shares if they were not acquired by subscription, if the company did not meet the qualifying trading company requirements at the time of issue, or (for reorganisation purposes) if they are of a different class from the qualifying shares being disposed of.

Access full legislation.And much more.

By becoming a member, your team gets full access to Tax World research tools and source-backed tax resources.

Become a member