Taxation of Chargeable Gains Act 1992, section 253

Relief for loans to traders

Part VII Other property, businesses, investments etc.

(1) In this section “a qualifying loan” means a loan in the case of which—

(a)the money lent is used by the borrower wholly for the purposes of a trade carried on by him, not being a trade which consists of or includes the lending of money, and

(b)[F1864 if the loan is made before 24 January 2019,F1864] the borrower is resident in the United Kingdom, and

(c)the borrower’s debt is not a debt on a security as defined in section 132;

and for the purposes of paragraph (a) above money used by the borrower for setting up a trade which is subsequently carried on by him shall be treated as used for the purposes of that trade.

(2)In subsection (1) above references to a trade include references to a profession or vocation; and where money lent to a company is lent by it to another company in the same group, being a trading company, that subsection shall apply to the money lent to the first-mentioned company as if it had used it for any purpose for which it is used by the other company while a member of the group.

(3)[F1865 Where a person who has made a qualifying loan makes a claim and at that timeF1865] —

(a)any outstanding amount of the principal of the loan has become irrecoverable, and

(b)the claimant has not assigned his right to recover that amount, and

(c)the claimant and the borrower were not each other’s spouses[F1866 or civil partnersF1866] , or companies in the same group, when the loan was made or at any subsequent time,

[F1867 then, to the extent that that amount is not an amount which, in the case of the claimant, falls to be brought into account as a debit given for the purposes of [F1868 Part 5 of CTA 2009F1868] (loan relationships),F1867] this Act shall have effect as if an allowable loss equal to that amount had accrued to the claimant [F1869at the time of the claim or (subject to subsection (3A) below) any earlier time specified in the claimF1869] .

[F1870 (3A)For the purposes of subsection (3) above, an earlier time may be specified in the claim if:

(a)the amount to which that subsection applies was also irrecoverable at the earlier time; and either

(b)for capital gains tax purposes the earlier time falls not more than two years before the beginning of the year of assessment in which the claim is made; or

(c)for corporation tax purposes the earlier time falls on or after the first day of the earliest accounting period ending not more than two years before the time of the claim.F1870]

(4)[F1871 Where a person who has guaranteed the repayment of a loan which is, or but for subsection (1)(c) above would be, a qualifying loan makes a claim and at that timeF1871] —

(a)any outstanding amount of, or of interest in respect of, the principal of the loan has become irrecoverable from the borrower, and

(b)the claimant has made a payment under the guarantee (whether to the lender or a co-guarantor) in respect of that amount, and

(c)the claimant has not assigned any right to recover that amount which has accrued to him (whether by operation of law or otherwise) in consequence of his having made the payment, and

(d)the lender and the borrower were not each other’s spouses[F1872 or civil partnersF1872] , or companies in the same group, when the loan was made or at any subsequent time and the claimant and the borrower were not each other’s spouses[F1872 or civil partnersF1872] , and the claimant and the lender were not companies in the same group, when the guarantee was given or at any subsequent time,

this Act shall have effect as if an allowable loss had accrued to the claimant when the payment was made; and the loss shall be equal to the payment made by him in respect of the amount mentioned in paragraph (a) above less any contribution payable to him by any co-guarantor in respect of the payment so made.

[F1873 (4A)A claim under subsection (4) above shall be made—

(a)for the purposes of capital gains tax, [F1874 not more than 4 years after the end ofF1874] the year of assessment in which the payment was made;

(b)for the purposes of corporation tax, within [F1875 4 yearsF1875] after the end of the accounting period in which the payment was made.F1873]

(5)Where an allowable loss has been treated under subsection (3) or (4) above as accruing to any person and the whole or any part of the outstanding amount mentioned in subsection (3)(a) or, as the case may be, subsection (4)(a) is at any time recovered by him, this Act shall have effect as if there had accrued to him at that time a chargeable gain equal to so much of the allowable loss as corresponds to the amount recovered.

(6)Where—

(a)an allowable loss has been treated under subsection (4) above as accruing to any person, and

(b)the whole or any part of the amount of the payment mentioned in subsection (4)(b) is at any time recovered by him,

this Act shall have effect as if there had accrued to him at that time a chargeable gain equal to so much of the allowable loss as corresponds to the amount recovered.

(7)Where—

(a) an allowable loss has been treated under subsection (3) above as accruing to a company (“the first company”), and

(b) the whole or any part of the outstanding amount mentioned in subsection (3)(a) is at any time recovered by a company (“the second company”) in the same group as the first company,

this Act shall have effect as if there had accrued to the second company at that time a chargeable gain equal to so much of the allowable loss as corresponds to the amount recovered.

(8)Where—

(a) an allowable loss has been treated under subsection (4) above as accruing to a company (“the first company”), and

(b) the whole or any part of the outstanding amount mentioned in subsection (4)(a), or the whole or any part of the amount of the payment mentioned in subsection (4)(b), is at any time recovered by a company (“the second company”) in the same group as the first company,

this Act shall have effect as if there had accrued to the second company at that time a chargeable gain equal to so much of the allowable loss as corresponds to the amount recovered.

(9)For the purposes of subsections (5) to (8) above, a person shall be treated as recovering an amount if he (or any other person by his direction) receives any money or money’s worth in satisfaction of his right to recover that amount or in consideration of his assignment of the right to recover it; and where a person assigns such a right otherwise than by way of a bargain made at arm’s length he shall be treated as receiving money or money’s worth equal to the market value of the right at the time of the assignment.

(10)No amount shall be treated under this section as giving rise to an allowable loss or chargeable gain in the case of any person if it falls to be taken into account in computing his income for the purposes of income tax or corporation tax.

(11)Where an allowable loss has been treated as accruing to a person under subsection (4) above by virtue of a payment made by him at any time under a guarantee—

(a)no chargeable gain shall accrue to him otherwise than under subsection (5) above, and

(b)no allowable loss shall accrue to him under this Act,

on his disposal of any rights that have accrued to him (whether by operation of law or otherwise) in consequence of his having made any payment under the guarantee at or after that time.

(12)References in this section to an amount having become irrecoverable do not include references to cases where the amount has become irrecoverable in consequence of the terms of the loan, of any arrangements of which the loan forms part, or of any act or omission by the lender or, in a case within subsection (4) above, the guarantor.

(13)For the purposes of subsections (7) and (8) above, 2 companies are in the same group if they were in the same group when the loan was made or have been in the same group at any subsequent time.

(14)In this section—

(a) “spouses” means spouses who are living together (construed in accordance with section 288(3)),

[F1876 (aa) “civil partners” means civil partners who are living together (construed in accordance with section 288(3)), F1876]

(b) “trading company” has the [F1877 same meaning as in section 165 (see section 165A) F1877] , and

(c) “group” shall be construed in accordance with section 170.

(15)Subsection (3) above does not apply where the loan was made before 12th April 1978 and subsection (4) above does not apply where the guarantee was given before that date.

Definitions used in section 253 16

trade

“trade” has the same meaning as in the Income Tax Acts;

Defined in s.288(1) · see it in the full Act

(b) “trade”, “profession” and “vocation” have the same meaning as in the Income Tax Acts.

Defined in s.165(8) · see it in the full Act

(9) In this section and Schedule 7 and in determining whether a company is a trading company for the purposes of this section and that Schedule, the expression “trade” shall be taken to include the occupation of woodlands where the woodlands are managed by the occupier on a commercial basis and with a view to the realisation of profits.

Defined in s.165(9) · see it in the full Act
the residents

(b) if 2 or more of them are then resident ... in the United Kingdom (“the residents”) it shall be treated as being as many equal capital payments as there are residents and each of them shall be treated as receiving one of the payments.

Defined in s.96(4) · see it in the full Act
resident

“resident” means resident in accordance with the statutory residence test in Part 1 of Schedule 45 to the Finance Act 2013 ;

Defined in s.288(1) · see it in the full Act
securities

(6) In sub-paragraph (4)(d) “securities” has the same meaning as in section 132.

Defined in Sch.4B para.12(6) · see it in the full Act

(2) In sub-paragraph (1)(a) “securities” has the same meaning as in section 132.

Defined in Sch.4B para.7(2) · see it in the full Act
profession

(b) “trade”, “profession” and “vocation” have the same meaning as in the Income Tax Acts.

Defined in s.165(8) · see it in the full Act
vocation

(b) “trade”, “profession” and “vocation” have the same meaning as in the Income Tax Acts.

Defined in s.165(8) · see it in the full Act
company

“company” includes any body corporate or unincorporated association but does not include a partnership, and shall be construed in accordance with section 99 ;

Defined in s.288(1) · see it in the full Act

(5) In this paragraph “company” and “group” shall be construed in accordance with section 170(2) to (9).

Defined in Sch.2 para.5(5) · see it in the full Act
group

(5) In this paragraph “company” and “group” shall be construed in accordance with section 170(2) to (9).

Defined in Sch.2 para.5(5) · see it in the full Act
trading company

1 (1) This paragraph gives the meaning of “trading company” and “trading group” where used in the following provisions of Chapter 3 of Part 5 ( business asset disposal relief )—

(a) in section 169I (material disposal of business assets)—

(i) paragraphs (a) and (b) of subsection (6) (which apply for the purposes of conditions A and B in that section), and

(ii) sub-paragraphs (i) and (ii) of subsection (7A)(c) (which apply for the purposes of conditions C and D in that section), and

(b) section 169J(4) (disposal of trust business assets).

Defined in Sch.7ZA para.1(1) · see it in the full Act

(2) “Trading company” and “trading group” have the same meaning as in section 165 (see section 165A) , but as modified by Part 2 of this Schedule.

Defined in Sch.7ZA para.1(2) · see it in the full Act

2 In provisions of Chapter 3 of Part 5 not mentioned in paragraph 1(1), “trading company” and “trading group” have the same meaning as in section 165 (see section 165A) , except that subsections (7) and (12) of section 165A are to be disregarded.

Defined in Sch.7ZA para.2 · see it in the full Act

(aa) “holding company”, “trading company” and “trading group” have the meaning given by section 165A; and

Defined in s.165(8) · see it in the full Act

Schedule 7ZA gives the meaning in this Chapter of “trading company” and “trading group”.

Defined in s.169SA · see it in the full Act
CTA 2009

“CTA 2009” means the Corporation Tax Act 2009 ;

Defined in s.288(1) · see it in the full Act
allowable loss

“allowable loss” shall be construed in accordance with sections 8(2) , 16 , 16A , 261B, 261D and 263ZA ;

Defined in s.288(1) · see it in the full Act

(1) For the purposes of this Act, “allowable loss” does not include a loss accruing to a person if—

(a)it accrues to the person directly or indirectly in consequence of, or otherwise in connection with, any arrangements, and

(b)the main purpose, or one of the main purposes, of the arrangements is to secure a tax advantage.

Defined in s.16A(1) · see it in the full Act
tax

and for the purposes of this definition “tax” means capital gains tax, corporation tax or income tax.

Defined in s.16A(2) · see it in the full Act
year of assessment

“year of assessment” means tax year;

Defined in s.288(1) · see it in the full Act
market value

(5AA) In this Act “market value” in relation to shares of a given class in an open-ended investment company the prices of which are published regularly by the authorised corporate director of that company (whether or not those shares are also quoted in The Stock Exchange Daily Official List) shall mean an amount equal to the price so published on the relevant date, or if no price was published on that date, on the latest date before that date.

Defined in s.272(5AA) · see it in the full Act

(5) In this Act “market value” in relation to any rights of unit holders in any unit trust scheme the buying and selling prices of which are published regularly by the managers of the scheme shall mean an amount equal to the buying price (that is the lower price) so published on the relevant date, or if none were published on that date, on the latest date before.

Defined in s.272(5) · see it in the full Act

(1) In this Act “market value” in relation to any assets means the price which those assets might reasonably be expected to fetch on a sale in the open market.

Defined in s.272(1) · see it in the full Act

(4) In particular, for the purposes of paragraphs 5 and 7 of this Schedule “market value” has the meaning given by paragraph 92 of Schedule 2 to that Act (determination of market value); and Part 8 of this Act has effect subject to this paragraph.

Defined in Sch.7D para.1(4) · see it in the full Act
income

(6) Sub-paragraphs (4) and (5) above apply for the purposes of paragraph (b) of sub-paragraph (1) above as they apply for the purposes of paragraph (a), reading “income” for “property".

Defined in Sch.5 para.2(6) · see it in the full Act
arrangements

“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), and

Defined in s.16A(2) · see it in the full Act

Cases considering section 253 4

Timothy Bunting v The Commissioners for HMRC

[2026] EWCA Civ 1331 · 16 October 2026Interprets

Trading-loan relief requires an amount remaining legally due when the claim is made. Release of indebtedness in exchange for worthless shares extinguished the relevant liability and prevented relief (see paras [30]; [47]–[48]). Accepted the common ground that the trading loans were qualifying loans. The dispute therefore concerned the separate requirement of outstanding, irrecoverable principal (see para [27]). Cited only. The statutory conditions focus on the position when the claim is made. Earlier irrecoverability does not preserve relief after the debt has been released. Possible exceptional insolvency consequences did not displace that construction (see paras [38]; [47]–[48]). An outstanding principal amount must remain legally due, with a legal right to pursue it. The wording accommodates principal-only relief, partial discharge or release, and partial irrecoverability. Unpaid but released indebtedness does not qualify (see paras [30]; [32]; [48]). The reference to a right of recovery supports continuing legal indebtedness. The provision is not redundant: it concerns the claimant's identity and assignment, while subsection (3)(a) concerns the loan's status (see paras [33]; [35]). Guarantor relief is consistent with outstanding meaning legally due. Following payment under a guarantee, indemnity and subrogation may preserve the borrower's legal liability to the guarantor, subject to the guarantee's terms (see paras [40]–[41]). An amount may remain outstanding and irrecoverable from the borrower after the guarantor pays the lender. The borrower may then owe the guarantor through indemnity and subrogation, rather than owe the original lender (see para [41]). Payment under a guarantee does not establish that no amount remains legally due from the borrower. Although payment may discharge liability to the lender, indemnity and subrogation may place the guarantor in the lender's position (see para [41]). The recovery mechanism supports construing outstanding amounts as involving continuing rights. The court questioned the earlier assumption that capitalisation after relief would cause no chargeable gain, but left the clawback valuation issue unresolved (see paras [33]; [44]; [46]). References to satisfaction or assignment of recovery rights support continuing indebtedness. It was plausible that property accepted in full satisfaction could trigger clawback for the entire debt discharged, irrespective of its market value. The court expressly left that construction undecided (see paras [33]; [45]–[46]).

Robson v HM Inspector of Taxes

[2005] EWCA Civ 585 · 18 May 2005Interprets

Applies the statutory scheme for relief following a guarantor’s payment, requiring the loan to satisfy the qualifying-loan conditions and the separate guarantee-payment conditions. The court treated the dispute as turning on the qualifying-loan requirement. (see paras [1]-[2]; [18]-[20]) Interprets the qualifying-loan requirement by focusing on the purpose for which the borrowing was incurred. Where borrowing is refinanced, the original indebtedness determines the relevant purpose. (see paras [18]-[24]; [27]-[30]) Interprets the requirement that money be used wholly for the purposes of a trade. A refinancing loan cannot acquire qualifying status merely because it repays existing borrowing; the purpose of the original borrowing remains decisive. (see paras [21]-[24]; [27]-[29]) Confirms that the guarantee and payment requirements were treated as satisfied by concession, leaving the qualifying-loan requirement as the only disputed issue. The court did not independently construe the individual conditions. (see paras [16]; [18]-[20])

The Commissioners for HMRC v Timothy Bunting

[2025] UKUT 96 (TCC) · 19 March 2025Interprets

Section 253(3) requires the qualifying loan amount to remain outstanding and irrecoverable when relief is claimed. A voluntarily released debt is not outstanding, so relief was unavailable after the capitalisation agreement (see paras [39]-[47]; [52]). The Tribunal construed “outstanding amount” as an amount subject to a continuing obligation to pay and an enforceable entitlement to recover. The released part of the loan therefore failed this condition despite being irrecoverable in an economic sense (see paras [40]; [43]; [47]). The requirement that the claimant has not assigned the right to recover “that amount” confirms that an outstanding amount under section 253(3)(a) is one for which a right to recover subsists (see para [44]). The Tribunal observed, without deciding its application, that section 253(3A) permits a claimant to specify an earlier time and may address timing concerns in many cases (see paras [48]; [50]). The Tribunal made no determination about relief for guarantors under section 253(4). It held only that submissions on this point did not justify adopting the First-tier Tribunal’s meaning of “outstanding” (see para [51]). The provision concerning subsequent recovery of an outstanding amount was treated as consistent with the conclusion that section 253(3) presupposes a continuing right to recover (see para [44]). The provision treating receipt of money or money’s worth in satisfaction of a right to recover as recovery was treated as consistent with the Tribunal’s construction of section 253(3) (see para [44]).

What each judgment says about section 253 is in the case-law panel in the full Act.

Amendments and notes

23 notes from legislation.gov.uk

Amendments

  1. F1864Words in s. 253(1)(b) inserted (11.3.2020) by Finance Act 2020 (c. 14), s. 27
  2. F1865Words in s. 253(3) substituted (with effect in accordance with Sch. 39 para. 8(5) of the amending Act) by Finance Act 1996 (c. 8), Sch. 39 para. 8(2)(a)
  3. F1866Words in s. 253(3)(c) inserted (5.12.2005) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 120(2)
  4. F1867Words in s. 253(3) inserted (with effect in accordance with s. 105(1) of the amending Act) by Finance Act 1996 (c. 8), Sch. 14 para. 65 (with Sch. 15)
  5. F1868Words in s. 253(3) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 382 (with Sch. 2 Pts. 1, 2)
  6. F1869Words in s. 253(3) substituted (with effect in accordance with Sch. 39 para. 8(5) of the amending Act) by Finance Act 1996 (c. 8), Sch. 39 para. 8(2)(b)
  7. F1870S. 253(3A) inserted (with effect in accordance with Sch. 39 para. 8(5) of the amending Act) by Finance Act 1996 (c. 8), Sch. 39 para. 8(3)
  8. F1871Words in s. 253(4) substituted (with effect in accordance with Sch. 39 para. 8(5) of the amending Act) by Finance Act 1996 (c. 8), Sch. 39 para. 8(4)
  9. F1872Words in s. 253(4)(d) inserted (5.12.2005) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 120(3)
  10. F1873S. 253(4A) inserted (with effect in accordance with s. 135(2) of the amending Act) by Finance Act 1996 (c. 8), Sch. 21 para. 40
  11. F1874Words in s. 253(4A)(a) substituted (1.4.2010) by Finance Act 2008 (c. 9), s. 118(2), Sch. 39 para. 30(a); S.I. 2009/403, art. 2(2) (with art. 10)
  12. F1875Words in s. 253(4A)(b) substituted (1.4.2010) by Finance Act 2008 (c. 9), s. 118(2), Sch. 39 para. 30(b); S.I. 2009/403, art. 2(2) (with art. 10)
  13. F1876S. 253(14)(aa) inserted (5.12.2005) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 120(4)
  14. F1877Words in s. 253(14)(b) substituted (with effect in accordance with Sch. 2 para. 56(3) of the amending Act) by Finance Act 2008 (c. 9), Sch. 2 para. 38

Modifications

  1. C409Ss. 253, 254 modified (11.1.1994 retrospective) by Finance Act 1994 (c. 9), s. 252(3), Sch. 24 para. 9(3)(4)
  2. C410Ss. 253, 254 restricted (11.1.1994 retrospective) by Finance Act 1994 (c. 9), s. 252(3), Sch. 24 para. 9(5)
  3. C411Ss. 253, 254 modified (19.9.1994) by Coal industry Act 1994 (c. 21), s. 68(4), Sch. 4 para. 9(2)(3) (with Sch. 4 para. 9(3)(5), 14); S.I. 1994/2189, art. 2, Sch.
  4. C412S. 253(4) modified (retrospective to 11.1.1994) by Finance Act 1994 (c. 9), s. 252(3), Sch. 24 para. 9(2)(5)
  5. C413S. 253(4) modified (8.11.1995) by Atomic Energy Authority Act 1995 (c. 37), Sch. 3 para. 6(2)
  6. C414S. 253(7)(8) excluded (11.1.1994 retrospective) by Finance Act 1994 (c. 9), s. 252(3), Sch. 24 para. 9(9)
  7. C415S. 253(9) modified (19.9.1994) by Coal industry Act 1994 (c. 21), s. 68(4), Sch. 4 para. 9(5) (with Sch. 4 para. 14); S.I. 1994/2189, art. 2, Sch.
  8. C416S. 253(10) modified (19.9.1994) by Coal industry Act 1994 (c. 21), s. 68(4), Sch. 4 para. 9(6) (with Sch. 4 para. 14); S.I. 1994/2189, art. 2, Sch.
  9. C417S. 253(13) applied (19.9.1994) by Coal industry Act 1994 (c. 21), s. 68(4), Sch. 4 para. 9(7) (with Sch. 4 para. 14); S.I. 1994/2189, art. 2, Sch.