Finance Act 1996

5 (1) In section 109A of the Taxes Act 1988 (relief for post-cessation expenditure) in subsection (4) (relief for debt taken into account in computing profits or gains and later released or proved to be bad), in the first sentence, for the words following “entitled” there shall be substituted “is released in whole or in part as part of a relevant arrangement or compromise (within the meaning of section 74), he shall be treated as making a payment to which this section applies of—

(a) an amount equal to the amount released, or

(b) if he was entitled to only part of the benefit of the debt, an amount equal to an appropriate proportion of that amount.”

(2) After that subsection there shall be inserted—

“(4A) Where a trade, profession or vocation carried on by a person has been permanently discontinued and subsequently an unpaid debt which was taken into account in computing the profits and gains of that trade, profession or vocation and to the benefit of which he is entitled, proves to be bad, then if—

(a) in making a claim for a year of assessment under subsection (1) above he gives notice that the debt was bad in any part of that year, and

(b) he has not given such a notice in respect of that debt in the making of any other such claim,

he shall be treated as making in that year a payment to which this section applies of an amount equal to the amount of the debt or, if he was entitled to only part of the benefit of the debt, to an appropriate proportion of that amount.

If any sum is subsequently received by him in payment of a debt for which relief has been given by virtue of this subsection, the sum shall be treated as one to which section 103 applies; and no deduction shall be made under section 105 in respect of any sum.”