Kevin Read highlights a recent case regarding capital losses on loans to traders.
In HMRC v Bunting [2025] UKUT 00096 (TCC), the Upper Tribunal (UT) considered when a loan to a trading business can be regarded as ‘outstanding’ and ‘irrecoverable’, meaning that the lender can claim an allowable capital loss.
The facts
Timothy Bunting (TB) made a series of loans, totalling £3.45m, to a trading company (Rectory Sports Limited) in which his wife was the sole shareholder and director. The company traded in sports memorabilia and books. By 2012, it was clear that the business was likely to prove unsustainable.
On 31 January 2013, TB and the company agreed to capitalise £2.2m of the loan, so 2.2 million ordinary shares of £1 each were issued in discharge of part of the loan. This was with a view to TB making a claim to set a
