Section 98 — Income Tax Act 2007: Meaning of “qualifying event” etc

Meaning of “qualifying event” etc 98 1 This section explains for the purposes of section 96 what is meant by—

a a “qualifying event” occurring in relation to a debt owed to a person who has permanently ceased to carry on a trade, and b “the appropriate amount of the debt” to be deducted in calculating a person's net income for “the relevant tax year”.

2 A qualifying event occurs in relation to a debt owed to the person if—

a an unpaid debt was brought into account in calculating the profits of the trade, b the person is entitled to the benefit of the debt, and c the debt is released (in whole or in part) as part of a statutory insolvency arrangement (within the meaning of Part 2 of ITTOIA 2005). The event occurs when the debt is released.

3 The appropriate amount of the debt to be deducted is—

a the amount released, or b if the person was entitled to only part of the benefit of the debt, the corresponding part of the amount released.

4 The relevant tax year is the tax year in which the debt is released.

5 A qualifying event also occurs in relation to a debt owed to the person if—

a an unpaid debt was brought into account in calculating the profits of the trade, b the person is entitled to the benefit of the debt, and c the debt proves to be bad. The event occurs when the debt proves to be bad.

6 The appropriate amount of the debt to be deducted is—

a the amount of the debt, or b if the person was entitled to only part of the benefit of the debt, the corresponding part of the amount of the debt.

7 The relevant tax year is the tax year specified in the claim.

8 The person making the claim may specify—

a the tax year in which the debt proves to be bad, or b a subsequent tax year throughout which the debt remains bad (so long as the tax year begins within 7 years of the cessation), but, if the person has previously made a claim specifying a tax year in respect of the debt, the person may not specify another tax year in respect of it.