Bad debts

By Tolley

The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Bad debts
  • Tax treatment
  • Where relief may be due
  • Statutory insolvency arrangements
  • Timing difference

This guidance note deals with the tax treatment of non-money debts only for accounting periods beginning on or after 1 January 2005. Most trading bad debts will be money debts and will, for companies, fall under the rules for loan relationships as ‘relevant non-lending relationships’ under CTA 2009, s 479. Broadly, a money debt is one falling to be settled by the payment of money or the issue or transfer of shares. For details on loan relationships, see the Loan relationships ― scope and definitions guidance note.

Debts which fall within either the Derivative contracts or the Intangible fixed assets regimes are also excluded from the rules covered in this guidance. See the Derivative contracts and Definition of intangibles guidance notes for information on these topics.

Tax treatment

A deduction is permitted from trading profits for the following:

    More on Trading company computations: