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Overview

Without specific provision, irrecoverable loans to traders, such as might be provided by relatives to a trader, or by directors to companies, would not be available for tax relief as capital losses. This is because ‘simple debts’, that is debts held by the original lender, which are neither ‘debts on security’ or gilt-edged securities, are not chargeable assets for capital gains tax, see CG53408.

This could be seen as a disincentive to business lending. A remedy is found in TCGA 1992, s 253. This section permits relief on a ‘qualifying loan’. Relief is available on a claim, and the agreed amount is then available for loss relief under the usual provisions. See the Use of capital losses guidance note.

A qualifying loan is one is used in a trade. The trade for which the money is lent must not be one of money lending, and