During the pandemic, the number of capital loss claims due to irrecoverable loans to businesses increased significantly. So claiming relief from this loss seems straightforward enough ...
Neither can it be a debt on a security and be made in actual money. Both parties cannot be connected such as spouses, civil partners, children or even companies with the same group. And, the loan must have been made after the 11th of April 1978.
So, before claiming relief, you first have to figure out if a loan is 'irrecoverable' and when that happened. HMRC itself considers a loan irrecoverable if there is no reasonable prospect of recovery of the loan as of the date of the relief claim. They will check by looking at the borrower's balance sheet before granting the relief claim. The borrower does not have to have ceased trading in exceptional cases.
And there are plenty of cases where a lender has disputed HMRC's judgement and appealed. They have even disputed a relief claim on the grounds of the borrower's financial prospects have improved and that the lender could now, in fact, recover the loan.
There is no standard form for claiming relief and it would be a great idea to speak to your accountant or tax adviser for the precise entries to be made on a corporation tax or self-assessment tax return. There also isn't a time limit on when irrecoverable loans can be claimed for.
Remember that many conditions must be met and be careful that the loan remains irrecoverable, or HMRC could attempt to claw back the relief.
If you'd like to find out more about anything I've written here, do call me on 01908 774323 or leave a comment below and let's see how I can help you.