Income Tax Act 2007

98 Meaning of “qualifying event” etc

(1) This section explains for the purposes of section 96 what is meant by—

(a) a “qualifying event” occurring in relation to a debt owed to a person who has permanently ceased to carry on a trade, and

(b) “the appropriate amount of the debt” to be deducted in calculating a person’s net income for “the relevant tax year”.

(2) A qualifying event occurs in relation to a debt owed to the person if—

(a) an unpaid debt was brought into account in calculating the profits of the trade,

(b) the person is entitled to the benefit of the debt, and

(c) the debt is released (in whole or in part) as part of a statutory insolvency arrangement (within the meaning of Part 2 of ITTOIA 2005).

The event occurs when the debt is released.

(3) The appropriate amount of the debt to be deducted is—

(a) the amount released, or

(b) if the person was entitled to only part of the benefit of the debt, the corresponding part of the amount released.

(4) The relevant tax year is the tax year in which the debt is released.

(5) A qualifying event also occurs in relation to a debt owed to the person if—

(a) an unpaid debt was brought into account in calculating the profits of the trade,

(b) the person is entitled to the benefit of the debt, and

(c) the debt proves to be bad.

The event occurs when the debt proves to be bad.

(6) The appropriate amount of the debt to be deducted is—

(a) the amount of the debt, or

(b) if the person was entitled to only part of the benefit of the debt, the corresponding part of the amount of the debt.

(7) The relevant tax year is the tax year specified in the claim.

(8) The person making the claim may specify—

(a) the tax year in which the debt proves to be bad, or

(b) a subsequent tax year throughout which the debt remains bad (so long as the tax year begins within 7 years of the cessation),

but, if the person has previously made a claim specifying a tax year in respect of the debt, the person may not specify another tax year in respect of it.