Commentary on Sections Overview Overview Section 94: Debts incurred and later released
366.If an amount owed by a company is released, this section treats the amount released as a trading receipt. The section is based on section 94 of ICTA. The corresponding rule for income tax is in section 97 of ITTOIA.
367.Subsection (1)(c) sets out the exception that applies if the debt is released as part of a “statutory insolvency arrangement”, which is defined in section 834(1) of ICTA.
368.The source legislation treats the sum as a receipt “in the period in which the release is effected”. The section makes it clear that the period in question is an accounting period. If the company is no longer carrying on the trade when the debt is released, the amount released is charged to tax as a post-cessation receipt (see section 193 of this Act).