Investors in troubled retail company Torex Retail (TRX:AIM) could be forgiven for losing hope of getting anything back from their investment. The firm, which makes software for cash registers and stock rooms, is in administration and trading in the shares has been suspended thanks to it being at the centre of a fraud investigation and an EU inquiry over a possible sale to US-based private investment firm Cerberus.
The holding company has informed shareholders that it is unlikely they will receive any proceeds from the administration.
Potentially though there is a way of realising some value from the shares. The first step would be to sell the stock to a third party for a nominal sum through an off-market transfer.
Off-market transfers are relatively simple and are often used by executors of estates.
You would need to complete a stock transfer form, which can be downloaded from the relevant registrar’s website. This form would then need to be sent to the relevant registrar, together with the covering share certificate.
A registrar who did not wish to be named confirmed that as long as the company is still paying its share registration fees then, even though the shares have been suspended, they can still be transferred.
Once the stock had been disposed of, the loss could be registered with the Inland Revenue and offset against the annual tax bill
Roger Lawson of the UK Shareholders’ Association, believes it is an expedient way for Torex shareholders to realise on their the capital loss. ‘It will almost certainly become a realised loss eventually, but it may take a couple of years before the Inland Revenue accepts the shares as a total right off,’ he says.
Mike Warburton, senior tax partner at accountants Grant Thornton agrees that it should be possible to realise the loss in this way but also suggested an alternative that he believes would be more effective. ‘If you were to do that you would have to give up beneficial ownership of the shares but if you made a negligible value claim you wouldn’t, and would therefore have the best of both worlds,’ he says.
A negligible value claim may be made by individuals which, if accepted by the Inland Revenue, would crystalise a capital loss that would otherwise not be available, due for example to lack of marketability in the shares.
There is no set form for the claim or indeed a rule denoting ‘negligible’. The Inland Revenue normally takes 5% as ‘small’ and has said that ‘next to nothing’ is negligible.
‘This is one of the few instances where tax legislation eases the pain of a loss in value to the taxpayer, if it’s available, use it,’ says Neil Pamplin, tax director at Grant Thornton.
