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HMRC have provided more information about the relief that might be allowable against income tax, capital gains tax and corporation tax to members who had shares and debt in Dairy Farmers of Britain (DFB).
Members sold their milk to DFB and in accordance with the agreement between the two parties a fraction of the income earned by members was placed in members investment accounts (MIAs). These were known as ‘milk retentions’.
These retentions should have been included in turnover when members prepared their annual financial accounts. Accounts approved after the appointment of the receiver need not include retentions in turnover.
But those approved before 3 June 2009 cannot be reopened by reason alone of DFB going into receivership.
There is no scope in tax law for allowing capital losses against income.
Members’ ordinary shares, ‘B’ shares and preference shares in DFB are now of negligible value.
The ‘A’ shares issued on 27 March 2009 in exchange for debt might also attract capital losses if their cost is greater than nil, but from the information the Revenue has seen, the department says the cost would appear to be nil.
With regard to certain loan stocks in the company, information held by HMRC suggests that the characteristics of the loan stocks mean that they were not chargeable assets for the purposes of capital gains so there can be no capital losses when the loans are disposed of. The amount of loan stock outstanding does not qualify as capital losses.
HMRC suggest that members who pay corporation tax may be able to claim relief for loans written off or reduced in value.
For more information, see Revenue and Customs Brief 5/10.
