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HMRC internal manual

Corporate Finance Manual

Old rules: loan relationships: authorised accounting methods: accruals basis: authorised arrangements for bad debt: conditions

Conditions for authorised arrangements for bad debt

This guidance applies to periods of account beginning before 1 January 2005

The authorised accruals basis can reflect provisions for bad and doubtful debts on a loan relationship where

  • the creditor company is unconnected to the debtor, or there is a connection but any of the exceptions in FA96/SCH9/PARA6(4), 6A or 6B apply, and
  • the accounting method requires recoveries and write-ups to be brought in.


FA96/SCH9/PARA5 allows a departure from the assumption that all amounts will be received in full and on time. However, FA96/SCH9/PARA6 does not allow such a departure in most circumstances, where there is a connection between the parties to the debt. For more information on Para 6, see CFM81100+.


Para 5(2) ensures that corresponding adjustments are made if

  • some or all of a debt previously written off is subsequently recovered, or
  • the debt is no longer wholly or partly within Para 5. This could be because

    • the debt is no longer estimated to be bad, and a provision is no longer needed, or
    • the companies have become connected, so (following Para 6), Para 5 can’t apply.