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Q: My client made a loan to his company which the company now cannot repay. Can any tax relief be claimed?

A: If certain conditions are met then lenders are able to claim relief in respect of qualifying loans to traders which have become irrecoverable.

The borrower can be a sole trader, partnership or a company.

The conditions for the loan to qualify are:

  • the loan must have been made after 11 April 1978
  • if loan made before 24 January 2019 the borrower must be UK resident
  • the borrower must have used the money wholly for the purposes of a trade, profession or vocation carried on by them (not including a trade of lending money)
  • the debt is not a ‘debt on a security’

The important point is that the loan must have become irrecoverable at some point after it was made. If there had been no reasonable prospect of the loan being repaid at the time it was made then it will not have become irrecoverable and will not qualify for relief.

The loan must also not have become irrecoverable due to some act by the lender.

If all the conditions are met then relief is given by treating the amount of loan that has become irrecoverable as a capital loss for Capital Gains purposes.


These publications from Markel Tax were correct at the time of going to press and should be considered as principles-based guidance only. To check current validity, call the Markel Tax helpline. ICAEW (as distributor) disclaims all liability for any errors or omissions.

About Markel Tax

Markel Tax offers expert advice on UK tax and VAT via its helpline and provides monthly FAQs with questions and answers on common tax issues for businesses and practitioners.