In JB v RB [2025] EWFC 194 (B), Recorder Allen KC was asked to answer a deceptively tricky question: when is a loan not a loan? The case delves into the increasingly common issue of "soft loans" from family members, and whether they should be treated as liabilities or mere gifts when dividing the matrimonial pot.

This case is a useful reminder for practitioners: not all IOUs are created equal—and unless properly evidenced, a loan may find itself at the back of the queue.

The Background

The husband (H) in JB v RB contended that two significant loans from his family—amounting to over £300,000—should be treated as matrimonial liabilities and reduce the net assets available for division. The wife (W) disputed this, claiming they were either gifts or at most soft loans unlikely to be repaid.

As is typical in these disputes, the “creditors” were H’s close family, and there was no independent documentation or third-party enforcement.

The Legal Framework: What Makes a Loan “Soft”?

The court in JB v RB adopted the approach endorsed in P v Q (Financial Remedies) [2022] EWFC B9 (HHJ Hess) and cited by Mr Justice Mostyn in P v Q [2022] EWFC 93, considering a range of factors when evaluating whether a loan should be treated as a genuine liability:

• Was there a written agreement?
• Were there any terms of repayment?
• Was there interest?
• Has any repayment actually been made?
• Would enforcement be pursued?
• Is the lender in the habit of enforcing such arrangements?

Where the answers to these questions suggest a “soft” arrangement—particularly where the parties would not expect the money to be repaid unless convenient—the court is more likely to treat it as a gift.

What the Court Found

In JB v RB, the judge concluded that the husband's claimed loans did not satisfy the criteria of a hard liability. Key points:

• There was no loan agreement, no repayment schedule, and no evidence of enforcement.
• The judge doubted the lender (the husband's mother) would pursue repayment if it meant her son being disadvantaged.
• No repayments had been made.
• The timing of the funds coincided suspiciously with the breakdown of the marriage.

The result? The sums were excluded from the schedule of liabilities. The husband's argument that they should be “added back” into the net asset pool failed.

Practical Guidance for Practitioners

1. Get it in writing: If family money is intended to be a repayable loan, make sure there’s documentation.
2. Ask the hard questions early: Consider early on whether the client’s claims about loans will stand up to judicial scrutiny.
3. Timing matters: Late-stage “loans” appearing post-separation are especially vulnerable.
4. Be wary of litigation risks: Contesting soft loans can be expensive and often yields little benefit.
5. Disclosure and evidence: Bank transfers alone won’t prove a debt exists. Courts want to see the paper trail and intentions behind the payment.

Conclusion: A Hard Line on Soft Loans

JB v RB confirms what family lawyers increasingly know: courts are sceptical of informal family loans, especially where they surface late in the day or are unsupported by clear documentation.

For spouses trying to insulate wealth or shrink the marital pot with a conveniently timed IOU, this case is a warning. If it walks like a gift and quacks like a gift—it probably won’t be treated as a loan.