CFM5122b - Taxing loan relationships: accounting methods: doubtful debts

Giving relief - doubtful debt

This guidance applies to periods of account beginning before 1 January 2005

Relief is due for a doubtful debt to the extent that it is estimated to be bad. A general provision is not allowable. Any provision against partial or complete irrecoverability must represent an estimate specific to the loan relationship and to the circumstances of the debtor. However, for banks, see BAM36000+.

Unpaid interest is a money debt due from the debtor company to the creditor company. It is not a loan relationship because there has been no lending of money in respect of this debt. It is, however, an ‘amount payable under a loan relationship’ and therefore comes into Para 5. If the creditor doubts that the interest will be paid then it can make a provision against interest receivable.