HMRC internal manual

Corporate Finance Manual

Old rules: loan relationships: connection and bad debts: exceptions to rules

Summary of exceptions

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

There were four exceptions to the restriction in para 6. They applied in the following circumstances.

  Legislation Circumstances Guidance
1 Para 6B(1)-(4) Bad debt relief has been given before connection CFM81180
2 Para 6B(5)-(7) Creditor has acquired bad debt in certain circumstances CFM81190
3 Para 6(4) Connection only arises because the debt is exchanged for equity CFM81200
4 Paras 6A & 5(6) The creditor company goes into insolvent liquidation CFM81210

These provisions modified the basic rule, that there was no bad debt relief for connected parties.

In addition, this section of the old rules guidance deals with what happens when a debtor company goes into insolvent liquidation (CFM81270).