Corporation Tax Act 2009 section 94

Debts incurred and later released

Section 94 deals with the tax treatment when a company has claimed a deduction for a trading expense that created a debt, and that debt is subsequently released in whole or in part.

• Where a company has taken a tax deduction for an expense that gave rise to a debt, and all or part of that debt is later released, the released amount must be brought back into the trade profit calculation as a receipt.
• The released amount is treated as arising in the accounting period in which the release takes effect.
• This rule does not apply if the release forms part of a statutory insolvency arrangement.
• If the company is no longer carrying on the trade at the time the debt is released, the amount is instead taxed as a post-cessation receipt under section 193 of the Act.