You should allow a sum on current account lost through failure
of a bank as a deduction up to a maximum of the amount normally
kept at that bank to meet ordinary banking requirements of the
business.
Where a provision is made in respect of such a balance
because it is expected to be lost, relief will be available for the
provision to the extent that it reflects the reasonable expectation
of loss - see
BIM46500 onwards for an explanation of
the requirements for a provision to be allowable.
The loss will also be deductible if the bank account balance
was held solely to facilitate the issue of credit or guarantees to
trade creditors provided that the creditors are in respect of debts
incurred on revenue account by the trade, profession or vocation
which suffered the loss.
Where disbursements are made on a client's behalf by a
professional person in the ordinary course of his profession, the
amount of such disbursements rendered irrecoverable by the client's
failure may be allowed as a deduction. (See the dictum of Lord
Warrington in CIR v Hagart & Burn-Murdoch [1929] 14TC433 at
page 447, see
BIM37770.)
In some cases you will need to consider the nature and use of
the account and to analyse the balance lost in order to determine
the extent to which relief may be available.
You should treat any distributions/receipts from the Deposit
Protection Board as a trading receipt in circumstances where you
would allow any loss arising would as a trading deduction.
