Old rules: loan relationships: consortia and bad debts: relevant net debit
Amount of restriction: relevant net debit
This guidance applies to periods of account beginning before 1 January 2005
An updated version of this example under the current rules appears at CFM35650.
Porwin Ltd was a consortium company owned
- 50% by Ulla (South) Ltd
- 50% by Rewdon Manufacturing Ltd.
Porwin began to trade in Year 1.
Ulla (South) Ltd and Ulla (North) Ltd were members of the Ulla group of companies.
Ulla (South) Ltd lent Porwin Ltd £30,000. Ulla (North) lent it £60,000. Ulla plc lent £100,000 and wrote this down by £50,000. This was a bad debt debit under Para 5 (authorised arrangements for bad debts).
The relevant net debit was £50,000.
Ulla (South) Ltd wrote down £20,000 of its loan. Ulla (North) Ltd wrote down £40,000, while Ulla plc reduced its provision for bad debts by £15,000.
The relevant net debit for the Ulla group in Year 2 was
|Written off (Para 5 debits)||£60,000|
|Bad debt reduction credit||£15,000|
|Relevant net debit||£45,000|
Rewdon Manufacturing Ltd was a member of the Rewdon group.
In this year, Rewdon Manufacturing Ltd made a loan of £100,000 to Porwin Ltd. It had written it down to £40,000, charging a debit of £60,000 under the Para 5 authorised arrangements for bad debts. No other member of the Rewdon group had made a loan to Porwin Ltd.
The relevant net debit for the group for this year was £60,000.
There were no bad debt debits or reductions in bad debt provisions.