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HMRC internal manual

Savings and Investment Manual

Peer to peer lending: Interaction of peer to peer tax relief with Capital Gains Tax

A small proportion of peer to peer (P2P) loans have been historically eligible for relief as a capital loss under Taxation of Chargeable Gains Act (TCGA 1992).

This may be the case for peer to peer loans that have been assigned to another person (more details in the Capital gains manual at CG53480), or for ‘loans to a trader’ (more details at CG65900).

This has especially applied for lenders using P2P platforms which specialise in loans to businesses.

Loans that become irrecoverable on or after 6 April 2016

An irrecoverable loan that would have been eligible for capital gains relief as a capital loss under TCGA 1992 will no longer be eligible for that relief.

This is because Section 2(3) of TCGA 1992 specifically gives priority to income tax reliefs.

However, in a situation where a loan does not meet the conditions for Income tax relief for irrecoverable peer to peer loans then the lender may still be eligible for capital loss relief on the loss that they incur, if the capital loss relief conditions are met.

This could also apply if the amount of Income tax relief for irrecoverable peer to peer loans available is limited to less than the full amount lost by the lender. In that case it is also possible that the lender may be eligible for capital loss relief on the remainder of the loss that they incur, if the capital loss relief conditions are met.

Loans that become irrecoverable between 6 April 2015 and 5 April 2016

An irrecoverable loan that would have been eligible for relief as a capital loss under TCGA 1992 may still be eligible for Capital Gains relief in full, but only if no claim is made for P2P income tax relief for the loss on the loan.