Finance Act 2002

Bad debts etc U.K.

115 (1) For the purposes of this Schedule a debt shall be brought into account on the assumption that the amount payable will be paid in full when it becomes due, except to the extent that—

(a) the debt is bad,

(b) the debt is estimated to be bad, or

(c) the debt is released as part of a statutory insolvency arrangement.

(2) In sub-paragraph (1)(c) a “statutory insolvency arrangement” means—

(a) a voluntary arrangement that has taken effect under or by virtue of the Insolvency Act 1986 (c. 45) or the Insolvency (Northern Ireland) Order 1989 (SI 1989/2405 (N.I. 19)), or

(b) a compromise or arrangement that has taken effect under section 425 of the Companies Act 1985 (c. 6) or Article 418 of the Companies (Northern Ireland) Order 1986 (SI 1986/1032 (N.I. 6)).

(3) Where a debt is released as mentioned in sub-paragraph (1)(c) any gain in respect of the release brought into account for accounting purposes by the debtor shall be disregarded for the purposes of this Schedule.

(4) Any other gain in respect of an unpaid debt in respect of an intangible fixed asset that is brought into account by the debtor for accounting purposes is treated for the purposes of paragraph 14 (receipts recognised as they accrue) as a gain in respect of an intangible fixed asset.

(5) Any adjustment required by this paragraph of an accounting gain or loss that is partly referable to an amount affected by this paragraph and partly to other matters shall be made on a just and reasonable basis.