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HMRC internal manual

Corporate Finance Manual

Old rules: taxing loan relationships: consortia and bad debts: amount of restriction

Amount of restriction

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

There were two calculations to make in deciding whether FA96/SCH9/PARA5A applied for each creditor bringing bad debts into account.

  • Was there a relevant net debit for bad debts (Para 5A(5))?
  • What amount of group relief had been claimed from the debtor consortium company (Para 5A(6))?

Para 5A(6) reduced the relevant net debit by the amount of group relief claimed (see CFM81380).

Relevant net debit

This was the amount by which the total bad debt debits brought in by all relevant creditors (a consortium member plus any members of its group) relating to amounts lent to a consortium company exceeded any recoveries from all such loan relationships for that group accounting period.

Amounts released by the creditor and brought into account by the debtor consortium company, were ignored in calculating this amount (Para 5A(15)).

See the example at CFM81350.

Group relief

For each group, look at any amount that

  • the debtor consortium company can surrender
  • the consortium member, or a group member, has claimed

for that group accounting period.

Where ICTA88/S403C applied to limit the amount of a consortium claim, S403C had priority.

There is an example at CFM81360.