When can a company claim a tax debit for a bad debt relating to an intangible fixed asset under section 869 CTA 2009?

Under section 869 of the Corporation Tax Act 2009, a company may only claim a tax debit for a debt owed to it in two circumstances: as an impairment loss where the debt has fallen in value because recovery is doubtful, or where the debt has been formally released as part of a statutory insolvency arrangement such as a company voluntary arrangement or administration.

Is a debtor company taxed on an accounting gain when a debt is released in a statutory insolvency arrangement under section 869?

No. Under section 869 of the Corporation Tax Act 2009, where a debt relating to an intangible fixed asset is released under a statutory insolvency arrangement, any accounting gain recorded by the debtor company from that release is disregarded for tax purposes under Part 8. The debtor is therefore not taxed on the benefit of having the debt written off in insolvency.

How is an accounting gain on an unpaid debt treated if there is no statutory insolvency arrangement under section 869?

If a debtor records an accounting gain on an unpaid debt connected with an intangible fixed asset outside a statutory insolvency arrangement — for example, where the creditor informally waives the debt — that gain is treated as a taxable receipt under section 721 of the Corporation Tax Act 2009 and brought into the debtor's corporation tax computation as income from the intangible fixed asset.

What does the term 'debt' mean for the purposes of section 869 CTA 2009?

For the purposes of section 869, 'debt' is defined broadly. It includes not only monetary debts but also any obligation or liability that falls to be discharged otherwise than by the payment of money, such as an obligation to transfer goods or provide services. Where adjustments are only partly affected by this section, apportionment must be made on a just and reasonable basis.

Corporation Tax Act 2009 section 869

Bad debts etc.

Section 869 sets out special rules governing the tax treatment of bad debts and released debts in the context of intangible fixed assets under Part 8 of the Corporation Tax Act 2009.

A company can only claim a tax debit for a debt owed to it either as an impairment loss or where the debt is released under a statutory insolvency arrangement
If a debt is released under a statutory insolvency arrangement, any accounting gain recorded by the debtor from that release is ignored for tax purposes under this Part
Any other accounting gain recorded by the debtor in respect of an unpaid debt relating to an intangible fixed asset is treated as a taxable receipt under section 721 (receipts recognised as they accrue)
The definition of "debt" is broad and includes any obligation or liability that is to be discharged otherwise than by money, and any adjustment that is only partly affected by this section must be apportioned on a just and reasonable basis

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