Finance Act 1994

144 Debts released in voluntary arrangement: relief from tax. U.K.

(1) In the Taxes Act 1988, in section 74 (general rules as to deductions not allowable), for paragraph (j) (debts not allowable except in certain circumstances) there shall be substituted—

“(j) any debts except—

(i) a bad debt proved to be such;

(ii) a debt or part of a debt released by the creditor wholly and exclusively for the purposes of his trade, profession or vocation as part of a relevant arrangement or compromise; and

(iii) a doubtful debt to the extent estimated to be bad, meaning, in the case of the bankruptcy or insolvency of the debtor, the debt except to the extent that any amount may reasonably be expected to be received on the debt;”.

(2) The provisions of that section shall become subsection (1) of that section and after that subsection there shall be inserted—

“(2) In paragraph (j) of subsection (1) above “relevant arrangement or compromise” means—

(a) a voluntary arrangement which has taken effect under or by virtue of the Insolvency Act 1986 or the Insolvency (Northern Ireland) Order 1989; or

(b) a compromise or arrangement which has taken effect under section 425 of the Companies Act 1985 or Article 418 of the Companies (Northern Ireland) Order 1986.”

(3) In the Taxes Act 1988—

(a) in section 94 (debts deducted and subsequently released) after the word “released” where it first occurs, and

(b) in section 103(4)(b) (debts deducted before, but released after, discontinuance of trade, etc.) after the word “released”,

there shall be inserted “ otherwise than as part of a relevant arrangement or compromise ”.

(4) The provisions of section 94 of the Taxes Act 1988 shall become subsection (1) of that section and after that subsection there shall be inserted—

“(2) In subsection (1) above “relevant arrangement or compromise” has the same meaning as in section 74.”

(5) After section 103(4) of the Taxes Act 1988 there shall be inserted—

“(4A) In subsection (4)(b) above “relevant arrangement or compromise” has the same meaning as in section 74.”

(6) Subsection (1) above shall have effect, for the purposes of determining (in computing the amount of profits or gains to be charged under Case I or Case II of Schedule D) whether any sum should be deducted in respect of any debt, in relation to debts—

(a) proved to be bad,

(b) released as part of—

(i) a voluntary arrangement which has taken effect under or by virtue of the M1 Insolvency Act 1986 or the M2 Insolvency (Northern Ireland) Order 1989, or,

(ii) a compromise or arrangement which has taken effect under section 425 of the M3 Companies Act 1985 or Article 418 of the M4 Companies (Northern Ireland) Order 1986, and

(c) estimated to be bad,

if the proof, release or estimation occurs on or after 30th November 1993.

(7) Subsection (3) above shall have effect in relation to the release on or after 30th November 1993 of the whole or any part of any debt.

Marginal Citations

M1 1986 c. 45.

M2 S.I. 1989/2405 (N.I. 19).

M3 1985 c. 6.

M4 S.I. 1986/1032 (N.I. 6).