BIM80745 - Post-cessation receipts: expenses: relief available under ICTA88/S109A: bad debts

ICTA88/S109A (4)

Relief for a bad debt, or a sum released under a formal voluntary arrangement, may be claimed against income and gains of the year of assessment in which the debt is notified to the HMRC as irrecoverable. Notice that the debt was bad (or that a debt has been released under a formal voluntary arrangement) is to be given in the notice in which a claim is made under Section 109A. The taxpayer is then to be treated as making a payment qualifying for the post-cessation expenses relief equal to the amount of the debt.

Interaction with other provisions

Relief is only available where the debt has not been relieved under some other provision, and where the taxpayer has not given notice that the debt was bad in the making of any other claim (see BIM80750).

Partners

In the case of a business formerly carried on in partnership where several partners have a continuing interest in the debt, apportionment of the relief in accordance with their respective interests will be necessary.

Recoveries

Any subsequent recoveries of debts for which relief has been given under Section 109A are to be charged to tax as post-cessation receipts.