Section 248: Debts paid after cessation
990.This section sets out what happens when a trader is allowed a deduction for a bad or doubtful debt owed to the trade but then recovers the debt after the trade has ceased. It is based on sections 103(5) and 109A of ICTA.
991.In the straightforward case where a deduction for the debt has been given during the course of the trade section 103(5) of ICTA makes it clear that the recovery has not been “taken into account” in calculating the trade profits. The result is that the recovery is within the charge in section 103 of ICTA.
992.In the less common case where the entitlement to relief has arisen under section 109A of ICTA after the cessation, the recovery is dealt with in section 109A of ICTA itself.
993.This section deals with both these cases.
994.Subsections (1) and (2) deal with the straightforward case and treat the recovery of the debt as a post-cessation receipt. The references to corporation tax and section 74(1)(j) of ICTA cater for the possibility that a deduction for a bad debt is allowed to a company liable to corporation tax but the debt is paid to a person liable to income tax.
995.Subsections (3) and (4) deal with the less common case and treat the recovery of the debt as a post-cessation receipt.
