Readers’ forum: Can preference shares be considered ordinary shares?

My query concerns whether what are described as preference shares can be regarded as ordinary shares for the purposes of ITA 2007 s 131 specifically the ability to use the capital loss realised on the shares against other income.

A client held ordinary and preference shares in an unquoted trading company and following a refinancing both categories of shares have been realised at a loss of about 25% and although it is quite clear the loss on the ordinary shares qualifies for relief under s 131 it is not clear to me whether the loss realised on the preference shares does.

ITA 2007 s 989 is clearly critical here: ‘Ordinary share capital … means all the company’s issued share capital … other than capital the holders of which have a right to a dividend at a fixed rate but have no other right...