Ken Moody looks at capital loss relief for loans to traders and (as usual) finds a few ‘quirks’ to chew over in the legislation and the related HMRC guidance.
The capital gains tax (CGT) legislation in TCGA 1992, s 253 (relief for loans to traders) provides for capital gains tax (CGT) loss relief where an individual has lent money to a ‘trader’ which has been used for the purposes of the trade but where the debt has become irrecoverable. The trader could be a company or an unincorporated business but must be trading or preparing to trade.
Is it really irrecoverable?
HMRC has somewhat fixed ideas, however, as regards the meaning of ‘irrecoverable’ (see HMRC’s Capital Gains Manual at CG65930P):
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HMRC correctly argues that the legislation requires that the loan must have become irrecoverable which would
