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HMRC internal manual

Business Income Manual

Specific deductions: bad & doubtful debts: waivers and slow payers

The following guidance does not apply to bad money debts of companies which are dealt with under the loan relationship rules. See BIM42701.


Where the amount claimed as a deduction represents a waiver or partial waiver for reasons other than the financial position of the debtor, the deduction may be inadmissible. Typical circumstances in which the deduction may be open to challenge include those where:

  • the debtor and creditor are relatives,
  • the debtor and creditor are a subsidiary company and its parent company respectively, or vice versa,
  • the debtor has made a composition with the creditor claiming the deduction, to the exclusion of other creditors.

It may, however, be found that the amount waived, while inadmissible as a bad or doubtful debt, is admissible as representing a special discount or trade allowance.

Slow payers

If the debtor is habitually a slow payer and there are no grounds to believe his financial position has changed, then we would not accept that the length of time a debt has been outstanding is on its own sufficient reason to regard it as doubtful. A provision made on these grounds cannot be considered as being ‘estimated to be bad’.