Introduction to this document

Claim for a capital loss for an irrecoverable loan to a trader

If you made a loan to a business which it cannot repay, the amount remaining outstanding may be treated as a capital loss. HMRC requires conditions to be met before it will accept the loss.

What loans qualify?

The loan will qualify for loss relief as long as it was used by the UK resident borrower (who can’t be your spouse) in their trade (excluding money lending). A qualifying loan can include a director’s loan to a close company.

What does irrecoverable mean?

You’ll need to show that there was no reasonable prospect of the loan ever being repaid. HMRC’s view is that if the borrower continues to trade, then there is still a chance they could repay the loan; however, this can be challenged if you can show that there was no reasonable prospect of the loan being repaid.

Time limit?

There’s no time limit in which to make a claim. The loss relief will be due at the time you make the claim or, if you prefer, up to two years previously. For example, if you make a claim in 2017/18, you may ask to claim relief in 2015/16 or 2016/17 providing the loan was irrecoverable at that time.


HMRC Helpsheet HS296 ( provides more guidance on making a claim.