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HMRC internal manual

Corporate Finance Manual

HM Revenue & Customs
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Loan relationships: connected companies and impairment: exceptions: insolvent creditors

Creditor in liquidation: position of creditor

The second exception to the rule that a creditor does not bring in debits in respect of the impairment or release of a debt owed by a connected debtor is in CTA09/S357. This disapplies CTA09/S354 in certain conditions where the creditor is insolvent. For guidance on the treatment of an insolvent connected party debtor see CFM35420

The conditions are that the creditor must be in

  • insolvent liquidation
  • insolvent administration
  • insolvent administrative receivership
  • provisional liquidation
  • or equivalent circumstances under the law of a territory outside the UK.

In each case, the test is that the amount accrues when the condition is in force, so the creditor can have impairment relief for any amounts accruing after the date of the proceedings whether or not it continues to be connected to the debtor company. There is no relief for any amounts accruing before the date of liquidation.