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HMRC internal manual

Capital Gains Manual

From
HM Revenue & Customs
Updated
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Losses: loans to traders: introduction

Debts which are not debts on a security do not give rise to chargeable gains in the hands of the original creditor by virtue of TCGA92/S251 (see CG12200+ for the treatment of debts). However, the provisions of TCGA92/S253 deem allowable losses to arise in certain circumstances where loans to traders have become irrecoverable. The conditions for relief are described at CG65930+. LOSSES WHICH ARISE UNDER SECTION 253 DO NOT ATTRACT INDEXATION ALLOWANCE This is because Section 253 deems an allowable loss equal to the amount of the loan which has become irrecoverable to accrue at the time of claim. It does not convert the losses into chargeable assets which would attract indexation allowance from the date of actual or deemed acquisition to the date of disposal. (The extent to which indexation allowance can create or increase a loss generally is subject to restrictions for disposals on or after 30 November 1993, see CG17700+.)