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DB 24: Share losses
or “Rules for claiming losses when shares lose value”
You could also call this:

“Tax rules for cancelled company shares you hold for trading”

This law is about what happens when a company cancels some of its shares. It applies to a specific situation described in section FA 4(3)(b).

If you own shares in a company and the company cancels some of them, you usually can’t claim a deduction for the extra cost added to your remaining shares. The only time you can claim this deduction is if the cancelled shares were part of your trading stock.

This rule overrides the general permission for deductions. This means that even if you would normally be allowed to claim a deduction, you can’t in this case.

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Next up: DB 26: Amount from profit-making undertaking or scheme and not already in income

or “Claiming deductions for profits from activities not covered by other tax rules”
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Part D Deductions
Specific rules for expenditure types

DB 25Cancellation of shares held as revenue account property

  1. This section applies for the purposes of section FA 4(3)(b) (Recharacterisation of shareholder’s base: company reacquiring share).

  2. A shareholder is denied a deduction for the amount added to the cost of their remaining shares of the same class as that of the share cancelled, unless the share is trading stock of the shareholder.

  3. This section overrides the general permission.

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Notes
  • Section DB 25(1): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on , by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
  • Section DB 25 list of defined terms profit-related debenture: repealed, on (not applying, for an income year, to a debenture that a person is party to, if the debenture is issued under an arrangement entered into before 22 November 2013; and a binding ruling on the application of section FA 2(5) was issued to the person in relation to the arrangement; and the binding ruling would continue to apply but for the repeal of the substituting debenture rule by the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (the Act); and for the whole of the income year, the total amount and the term of all debentures issued under the arrangement are not more than those disclosed in the application for the binding ruling; and the person makes an irrevocable election in writing, received by the Commissioner on or before 31 July 2014, that the repeal of the substituting debenture rule in the Act does not apply to their debenture), by section 46(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
  • Section DB 25 list of defined terms substituting debenture: repealed, on (not applying, for an income year, to a debenture that a person is party to, if the debenture is issued under an arrangement entered into before 22 November 2013; and a binding ruling on the application of section FA 2(5) was issued to the person in relation to the arrangement; and the binding ruling would continue to apply but for the repeal of the substituting debenture rule by the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (the Act); and for the whole of the income year, the total amount and the term of all debentures issued under the arrangement are not more than those disclosed in the application for the binding ruling; and the person makes an irrevocable election in writing, received by the Commissioner on or before 31 July 2014, that the repeal of the substituting debenture rule in the Act does not apply to their debenture), by section 46(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).