Income Tax Act 2007 section 98

Meaning of "qualifying event" etc.

Section 98 defines what counts as a "qualifying event" in relation to a debt owed to someone who has permanently ceased trading, and explains how to calculate the amount that can be deducted for post-cessation trade relief under section 96.

• A qualifying event occurs when an unpaid trade debt that was included in the profit calculations is either released (wholly or partly) under a statutory insolvency arrangement, or proves to be bad.
• The deductible amount is the amount released or, for a bad debt, the full debt amount — but if the person was only entitled to part of the debt's benefit, only the corresponding proportion qualifies.
• For a debt released under an insolvency arrangement, the relevant tax year is the year the debt is released; for a bad debt, the claimant can specify the year the debt proved bad or a later year in which it remains bad, provided that year begins within seven years of the trade ceasing.
• Once a claim has been made specifying a particular tax year for a bad debt, the claimant cannot specify a different tax year for the same debt.