Commentary

C3.701 Irrecoverable loans to traders—overview

Capital gains tax
Capital gains tax | Commentary

C3.701 Irrecoverable loans to traders—overview

Capital gains tax | Commentary

Division C3.7     Loans to traders

For updates affecting this Division please see Part C0 Updates

Irrecoverable loans to traders

C3.701 Irrecoverable loans to traders—overview

Debts and capital gains tax

Debts are expressly included as assets for capital gains tax purposes1. However, unless the debt is a debt on a security or a debenture deemed for these purposes to be a security (see C3.1810), no chargeable gain or allowable loss accrues to the original creditor on its disposal2. See also C1.510.

Irrecoverable loans to traders and payments made under guarantee

Notwithstanding this, TCGA 1992, s 253 entitles lenders to claim an allowable loss in respect of qualifying loans to traders which have become irrecoverable. It also entitles guarantors to claim an allowable loss in respect of guarantee payments made in relation to qualifying loans to traders which have become irrecoverable.

Once claimed the loss can be utilised in the same way as any other allowable capital loss. See C1.502 (capital gains tax) and D1.925 (corporation tax).

Persons who can claim

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