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HMRC internal manual

Corporate Finance Manual

Old rules: loan relationships: consortia and bad debts: limit of debits

Limit of bad debt debits

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

This was the main rule in FA96/SCH9/PARA5A.

Where there was

  • an excess of bad debt debits over credits (the relevant net debit), and
  • any consortium member or its fellow group members had claimed group relief

then Para 5A(6) restricted the amount of bad debt debits by the amount of group relief claimed.

There was no restriction on the group relief claim, which was allowed in full - unless Para 5A(12) applied (see CFM81410).

See below for how this works in the circumstances set out in CFM81350 and CFM81360.

Ulla group

Ulla (South) Ltd and other group companies made group relief claims up to the maximum, £51,000 in Year 1. The relevant net debit in Year 1 was £50,000. So the bad debt debit for Year 1 was restricted to nil.

Rewdon Group

In Year 1, Rewdon Manufacturing Ltd’s fellow subsidiary, Brinfot Ltd, claimed the maximum amount of group relief (£51,000) from Porwin Ltd. The net relevant debit was £60,000. This was restricted by the amount of group relief, so Rewdon Manufacturing Ltd’s bad debt debit for Year 1 under Para 5 was £9,000.

There are more examples at CFM81390.