TACS Partnership looks at the capital gains tax relief for loans to traders by individuals.
An individual who makes a loan to a company they own will probably expect to obtain tax relief if the loan is subsequently written off. Capital gains tax relief on the loan write-off is potentially available if certain conditions are satisfied (TCGA 1992, s 253).
Hurdles to jump
For example, the relief applies to qualifying loans (s 253(1)). A 'qualifying loan’ is broadly a loan used wholly for the borrower's trade, profession or vocation, including setting it up. This requirement excludes money lending trades. In addition, the borrower must be UK resident, although the scope of the relief is set to be widened in Finance Act 2020. The debt must not be a 'debt on a security' (as defined).
