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The appellant and M were founders and directors of a software company. They subscribed 400 of the 800 £1 ordinary shares in the company as well as advancing £50 000 to it. As the initial company accounts showed a loss the company obtained extra finance from S a venture capital fund. In May 2003 S invested £250 000 in the company in return for £150 000 preference shares and £100 000 A ordinary shares. S also required the directors to capitalise their advances of £50 000 by taking 50 000 £1 B ordinary shares.
The company went into liquidation in 2005. The appellant claimed a capital loss of £50 400 under TCGA 1992 s 24(2) setting off the loss against taxable income under TA 1988 s 574.
HMRC allowed the loss in respect of the 400 £1 shares but not that in...
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