Corporation Tax Act 2009 section 192

Debts paid after cessation

Section 192 deals with the tax treatment of debts that are recovered after a trade has permanently ceased, where a deduction for the bad debt was previously allowed during the life of the trade.

• Where a deduction for a bad or doubtful debt has been claimed in calculating trade profits for corporation tax or income tax purposes, and the trade subsequently ceases permanently, any amount later recovered in respect of that debt is treated as a post-cessation receipt.
• The recovery is only treated as a post-cessation receipt to the extent that a deduction was originally made for the debt.
• The rule applies regardless of whether the original deduction was claimed under corporation tax rules (section 55 of CTA 2009) or income tax rules (section 35 of ITTOIA 2005), recognising that the person recovering the debt may be subject to a different tax regime from the person who claimed the deduction.
• As a post-cessation receipt, the recovered amount is brought back into charge to tax even though the trade has ended, ensuring that the tax relief originally given for the bad debt is effectively reversed to the extent that the debt is subsequently paid.