BIM40201 - Receipts: unclaimed balances: introduction and scope of subject

Overview

BIM40200 explains the tax treatment of a variety of miscellaneous sums. They are referred to collectively as ‘unclaimed balances’. They include sums derived from a trader’s customers described as ‘unclaimed balances’, ‘overpayments’, ‘windfalls’, ‘voluntary payments’, ‘double payments’, ‘payments by mistake’, sums written back, etc. Such sums also arise if a supplier fails to ask a trader for money properly due, or asks for less than is properly due or refunds money in error.

The correct tax treatment depends on the nature and extent of the trade and the circumstances of receipt or payment. Broadly speaking, unclaimed balances, which are not on capital account, are part of the trading or property income for the year in which they are recognised as such in business accounts. And they are taxable in that year.

A provision for a future liability that satisfies the criteria in BIM46510 is allowable for tax. To the extent that the provision is not required it will be written back to profit and loss and is taxable when written back. The write back of the whole or part of a provision that is no longer required is not an example of ‘unclaimed balances’. The case law described in BIM40200 is of no application.

You should read the whole of BIM40200 to understand this subject.