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Spring Budget 2020: Capital gains tax relief for loans to traders

The existing capital gains tax relief for irrecoverable loans to traders is to be extended to cover loans to businesses outside the UK.

A taxpayer may claim relief for a capital loss on a loan made to a UK resident trader if the loan becomes irrecoverable. In January 2019, the European Commission ruled that by limiting the relief to loans made to UK resident borrowers, the UK was in breach of the European Union Treaty guaranteeing the Freedom of Movement of Capital. In spite of the UK’s departure from the European Union, the Finance Bill will include legislation to extend this relief to cover all qualifying loans made from 24 January 2019, wherever the borrower is situated.

About the author

Maggie Gonzalez

+44 (0)20 7556 1370
gonzalezm@buzzacott.co.uk

A taxpayer may claim relief for a capital loss on a loan made to a UK resident trader if the loan becomes irrecoverable. In January 2019, the European Commission ruled that by limiting the relief to loans made to UK resident borrowers, the UK was in breach of the European Union Treaty guaranteeing the Freedom of Movement of Capital. In spite of the UK’s departure from the European Union, the Finance Bill will include legislation to extend this relief to cover all qualifying loans made from 24 January 2019, wherever the borrower is situated.

What should you do?

Individuals and companies who have made loans to businesses outside the UK since 24 January 2019, where there is no prospect of the loan being repaid, will now be able to claim a capital loss. However no relief will be available for older loans to foreign businesses.

If you have lent funds to a trader who is now in difficulty and cannot repay the loan, contact us to review the potential for claiming a capital loss.

Read more on the Budget here.

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