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TaxRobin, Tax Consultant
Category: Tax
Satisfied Customers: 19446
Experience:  International tax
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I have made a personal loan to my parents to set up a

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Hi, I have made a personal loan to my parents to set up a business, but the loan will likely not be fully repaid. I am a Dutch national, but resident and tax paying in the UK. The business has been started in the NL, and my parents currently live in the NL. However they may move to the UK for a short period of time in the near future. Can I offset this unpaid loan with my taxes?

Hello and thank you for allowing me to assist you.

The debtor and creditor must not be connected. Debts owed by related parties such as family members, business partners, shareholders or connected companies are not tax deductible.

Although you may charge interest and all the requirements apply for a lending, your loan is made to parents and therefore not eligible for deduction.

Please scroll up to see the STARS to rate so I am credited.

Customer: replied 6 months ago.
Hi, I have read your reply, but why does HMRC use a brother as examples?

The brother is a resident of the UK plus it is for a trade in the UK

Customer: replied 6 months ago.
Ok. Could you point out to me where it says the trade needs to be (wholly) in the UK? Or is this implied? And for UK residency, does it need to be from the moment of lending? or at the time of deducting tax. Or from start to end?
Back to your original answer on debtor-lender not being connected, which HMRC reference policy would this refer to?

Under 253 TCGA 1992 the borrower must be a UK resident when they receive the loan

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