Income and Corporation Taxes Act 1988

[F1 89 Debts proving to be irrecoverable after discontinuance etc U.K.

(1) This section applies if—

(a) section 337(1) applies to treat a trade as discontinued by reason of any event, or

(b) a person permanently ceases to carry on a trade or profession,

and a company carries on the trade or profession after that event or cessation.

(2) In computing for corporation tax purposes the profits of the trade or profession in any period after the event or cessation, there may be deducted a sum equal to any amount proved during that period to be irrecoverable in respect of any debts—

(a) which were credited in computing for tax purposes the profits for any period before the event or cessation, and

(b) in respect of which the benefit was assigned to the company carrying on the trade or profession after the event or cessation.

(3) Subsection (2) applies only so far as the total amount proved to be irrecoverable in respect of the debts exceeds any [F2 relevant deduction in respect of them] in a computation for any period before the event or cessation.

[F3 (4) In this section “debt” includes an obligation or liability that falls to be discharged otherwise than by the payment of money.

The references to a debt being irrecoverable shall be read accordingly.

(5) For the purposes of this section “relevant deduction”, in relation to a debt, means a deduction made for tax purposes in respect of an impairment loss or release.]]

Textual Amendments

F1 S. 89 substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 65 (with Sch. 2)

F2 Words in s. 89(3) substituted (with effect in accordance with s. 80(3)(4) of the amending Act) by Finance Act 2005 (c. 7), Sch. 4 para. 3(3)(a)

F3 S. 89(4)(5) added (with effect in accordance with s. 80(3)(4) of the amending Act) by Finance Act 2005 (c. 7), Sch. 4 para. 3(3)(b)