Corporation Tax Act 2009 section 55

Bad debts

Section 55 restricts the circumstances in which a company can claim a deduction for bad debts that are non-money debts when calculating its trading profits.

• This section applies only to non-money debts — that is, debts that fall outside the loan relationships rules in Part 5 of the Act, and are also not covered by Part 7 (derivative contracts) or Part 8 (intangible fixed assets).
• A company cannot deduct a non-money debt from its trading profits unless the deduction is by way of an impairment loss (broadly, where the debt has become uncollectable or has fallen in value).
• The only other permitted deduction is where the debt is released wholly and exclusively for the purposes of the trade as part of a statutory insolvency arrangement.
• Money debts arising in a trade are dealt with separately under the loan relationships rules, so this section addresses only non-monetary obligations owed to the company.