SolvedCFM81170 | Old rules: loan relationships: connection and bad debts: exceptions to rules
From HM Revenue & Customs · Corporate Finance Manual
Summary of exceptions
This guidance applies to periods of account beginning before 1 January 2005
There were four exceptions to the restriction in para 6. They applied in the following circumstances.
| - | Legislation | Circumstances | Guidance |
|---|---|---|---|
| 1 | Para 6B(1)-(4) | Bad debt relief has been given before connection | CFM81180 |
| 2 | Para 6B(5)-(7) | Creditor has acquired bad debt in certain circumstances | CFM81190 |
| 3 | Para 6(4) | Connection only arises because the debt is exchanged for equity | CFM81200 |
| 4 | Paras 6A & 5(6) | The creditor company goes into insolvent liquidation | CFM81210 |
These provisions modified the basic rule, that there was no bad debt relief for connected parties.
In addition, this section of the old rules guidance deals with what happens when a debtor company goes into insolvent liquidation (CFM81270).