CGT Conundrum

I don't think so. Assuming that these were loans to businesses they might be offset able against capital gains once they became worthless. If they stopped being worthless they would create a gain.


As far as I understand it you would have to have made a negligible value claim (within 2-3 years of each of the losses) and to have recorded the loss on your tax return at the time. It isn't enough for the company to be in administration, there should have been little chance of a recovery. Did you make such a claim? And did you put it on your tax return?

Case A) If you made a negligible value claim for each of the loans my GUESS (which feels wrong) is that you would have had £4,000 of losses carried forward by year 6, the recoveries previously below your allowance, which would reduce your gain below the the allowance so pay no CGT in year 6 or 7.

Case B) If you didn't make a negligible value claim at the time, you might be able to make a claim now for loan C, backdated 1 year, and loan B, backdated 2 years, in each case for a loss of £500 (you can't now claim that you thought these loans were worthless). This would give you between £500 and £1,000 to offset against your gain (depending on how long ago this was and whether you can backdate to year 5). In this case you would pay CGT on £2,000. There would have to be little prospect of further recovery on B or C.

There does seem to be some confusion about what happens to a loan to a company that went into a recovery process (say administration) pre 2015, but with some prospect of recovery, but that losses were crystallised after the new regime. Some think that you can't claim the loss under either system. 

I was in a similar position to case B last year and the size was similar and I decided to pay the £90 (possibly extra) tax and not worry about the extra paperwork and risk of being challenged. If I had fallen into case A with a possible saving over £500, I would have put the effort in and probably seen an accountant.

HMRC losses
HMRC negligible value claims

I don't think negligible value claims apply, as these are loans not shares...

www.rossmartin.co.uk/private-client-a-estate-planning/capital-gains-tax/1153-cgt-relief-loans-to-traders
www.taxation.co.uk/Articles/2012/10/24/295191/slide

My view was similar to pom's, although I'm open to other opinions. 

The important questions therefore for me are:

a) where do you record the losses on the tax return? If they do not affect your current tax position, rather than lose their benefit, I see no harm in recording them, on the off-chance they may come in handy in the future, when I could take further advice if necessary before making use of them to mitigate future CGT.

b) I'm unclear whether the late recording of such losses is restricted to 2 or 4 years late, and whether whichever limit is correct could be applied to an amended 2015/16 tax return, before the end of this month...

The position I outlined was the one which seemed to prevail on the Thin Cats forum. If you are a member there I would suggest you ask your question there. ross martin has a similar position to me where loans which later are recovered become capital gains.

Nothing in the HMRC help sheet I linked to mentions shares. The first four sections discuss assets. The latter sections talk about shares in EIS companies in which losses may be offset against income, but these don't apply in your case.