In Brown v HMRC [2013] TC03118, a shareholder was allowed a negligible value claim in respect of his shares in a company which was still trading.

  • Mr Brown (B) made negligible value claim in respect of his 1% shareholding in a private company in order to claim income tax share loss relief.
  • The company was engaged in research and development and had made losses for many years, had negative net assets and would have needed to make £15 million in profits before it could ever pay a dividend.
  • The company was kept afloat by the support by the key director/investor.
  • HMRC objected to his claim saying that the continuing financial support meant that the shares were not of negligible value.

The FTT considered what factors it should take into account in deciding whether unquoted shares are of a “negligible value”.

It rejected HMRC’s claim that the shares were not of negligible value because the company was high risk, had always made a loss, and was still trading.

B had stated that he was neither willing to give away his shares, nor sell them for less than 10p a share and the company had offered new shares for sale at £1 a share but there were only purchased by majority shareholder had subscribed for the shares (who was, in any event, underwriting them).

The FTT held that:

  • The shares had no value on normal methods of valuation.
  • No one would place a current value on the possibility of future dividends because the possibility that the company would ever earn sufficient profits to pay dividends was so remote.
  • The evidence also showed that no one, other than the majority shareholder, was prepared to take the risk and invest in the company and that person’s motivation was held to be not entirely commercial.

In short, there was no evidence the hypothetical purchaser of a minority shareholding would be willing to acquire shares in this company. The FTT held that the shares were of negligible value.


The FTT confirmed that a company does not have to be formally struck off for its shares to have negligible value.


Brown v HMRC UKFTT [2013] (TC03118)