CFM5122c - Taxing loan relationships: accounting methods: releases
Giving relief - release of debt
This guidance applies to periods of account beginning
before 1 January 2005
Releases of debt are comparatively rare.
A debt is released only when the lender has waived the
borrower's obligation to repay. The writing off of a debt in a
company's accounts is not a release, because in that situation the
borrower's obligation to repay remains.
A release can be of the entire amount of the debt, or part of
the debt. When the lender releases a debt, it ceases to be a party
to the loan relationship. Its rights have been extinguished, so
this is a related transaction (see
CFM5067). However,
S85 still applies - the lender must assume that the amount is
paid in full , but
Para5(1)(c) requires a departure from this assumption
so a debit for amounts released, in full or in part, is in accordance with the authorised accruals basis.
