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Availability of relief on losses for loans to a company that has not traded.
Some time ago my client invested in shares in a company that intended to pioneer a new technology to break down used tyres into useful by-products.
The company bought an expensive machine that was supposed to do this but it has not worked properly. As a result the production process was unable to start and the company will be wound up. It appears that all the shareholders will suffer a complete loss of their original investment.
Clearly there are losses on the shares but my client’s financial situation has been made worse because he also made loans to the company.
My reading of TCGA 1992 s 253 (‘Relief for loans to traders’) suggests that the relief for losses on loans may not be available to him. Section 253(1)(a) refers to money used ‘by the borrower wholly for the purposes of a trade carried on...
