Claim for payment under guarantee

One way of helping a growing business is to act as guarantor to its loan finance. If you are called upon to make good some or all of the loan under the terms of the guarantee, you may be entitled to claim a capital gains tax loss.

Capital losses - payment under a guarantee

Rather than lending it money, you may have helped a business by giving a guarantee on a business loan. For example, if you’re a company director you may have had to give personal guarantees in respect of a loan to your company. If the business can’t repay the loan, then the lender may call on you to pay the outstanding capital and interest In these circumstances, you can make a Claim for Payment Under Guarantee to have the amount paid treated as a capital loss.

Conditions

To claim the relief, the guarantee must relate to a loan to a UK resident borrower (which cannot be your spouse) and used for the purposes of their trade. The  guarantee must be an enforceable one, i.e. voluntary settlement of the loan on behalf of the borrower will not not qualify for relief.

Time limit

The claim has to be made within four years of the end of the tax year in which you make the payment under guarantee.