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).
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.
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.