Taxation of Chargeable Gains Act 1992 section 253

Relief for loans to traders

Section 253 provides relief in the form of an allowable capital loss where a loan made to a trader becomes irrecoverable, or where a guarantor of such a loan has to make a payment under the guarantee.

• A "qualifying loan" is one where the borrower uses the money wholly for the purposes of a trade (not money-lending), the borrower's debt is not a debt on a security, and (for loans made before 24 January 2019) the borrower is UK resident.
• If the principal of a qualifying loan becomes irrecoverable, the lender may claim an allowable loss equal to the irrecoverable amount, provided the lender has not assigned the right to recover, and the lender and borrower are not spouses, civil partners, or companies in the same group.
• A guarantor of a qualifying loan may also claim an allowable loss equal to the net payment made under the guarantee (after deducting any contribution receivable from co-guarantors), where the loan has become irrecoverable from the borrower and similar relationship conditions are met.
• If any amount for which loss relief has been given is subsequently recovered — whether by the original claimant or by a company in the same group — a chargeable gain equal to the recovered amount arises, clawing back the earlier relief.