When a company becomes insolvent (as many have in the last year or so) one effect is that its shares will normally have nil or negligible value and the holder of the shares will therefore normally show a ‘book loss’ on them. Such losses can be relieved against taxable gains in certain circumstances.

Transfers of shares between spouses and civil partners are ‘no gain, no loss’ transactions for Capital Gains Tax (CGT) purposes so, in the circumstance in which one of the couple has taxable gains, it may seem like a good idea for their spouse or partner to transfer to them their nil value shares, so that they can claim the loss on them against other gains. It may be tempting, but it isn’t wise.

The reason is that there is a clever piece of anti-avoidance legislation which requires a person making a ‘nil value’ claim to demonstrate that the asset concerned has become of negligible or nil value while they owned it. Clearly, if such an asset has been transferred to them, it cannot have become of negligible or nil value while they owned it, so the relief is not available.

The legislation isn’t that clever, however. There is nothing to stop a transfer of assets which show a gain to the spouse or civil partner who owns the negligible value asset. The loss relief will then be available and the transfer is also a ‘no gain, no loss’ transfer, so the transferring spouse will not have a CGT liability on the shares transferred.