CG65995 - Losses: loans to traders: losses: loans to traders: novation of debt

Where an original loan has been novated (basically this means a change of lender), it may be accepted that the new lender has made a loan for the purposes of TCGA92/S253. The use to which the loan is put will normally be determined by reference to the use to which the earlier loan has been put, that is, on the basis that the new loan has been used to repay the earlier loan.

Novation does not involve the assignment of rights under the original loan. A new loan is created in identical terms to the original loan except in so far as the identity of the lender is concerned. This is particularly likely in a group context.