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HMRC internal manual

Capital Gains Manual

Losses: loans to traders

Loans are not defined, but we accept that bank overdrafts and credit balances in directors’ loan accounts are capable of qualifying. Ordinary trade debts in respect of supplies, which qualify for a Case 1 deduction, will not normally qualify. However, if there is an agreement between the trader and the supplier on terms which provide abnormally long credit periods, then debts may, exceptionally, qualify. Such debts will not qualify where they merely represent unenforced trade debts where there has been no specific agreement to extend the period of credit.