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Capital loss relief for loans to traders was due following capitalisation of loan

By Mark McLaughlin, July 2024

On a proper interpretation of the capital loss relief provisions on loans to traders, the taxpayer was entitled to make a capital loss relief claim following the capitalisation of a loan.  

The appellant wanted to establish a business dealing in sports history books and memorabilia. In July 2004, a company (RSL) was incorporated, which was capitalised by one ordinary share of £1. The business activities were funded by the appellant, who personally invested £3,452,771 through a series of non-interest-bearing loans (the loan).  

By 2012, it became apparent that the business was becoming unsustainable. In January 2013, the appellant and RSL entered into an agreement for the capitalisation of £2,200,000 of the loan. Pursuant to that agreement, RSL issued 2,200,000 ordinary £1 shares to the appellant and in consideration the appellant agreed to ‘fully and irrevocably release and discharge the Company from

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