Special Commissioners’ decisions

Controlling debt

It is of course a general rule that relief against income is only given for revenue rather than capital expenditure. So if one company has lent another company money for the purchase of goods from it – a trade credit – and this may for example be where the purchasing company has a period of credit before it needs to make payment for the goods that it has received and this debt goes ‘bad’ then relief is available under section 74( j ) Taxes Act 1988. However section 83 Finance Act 1996 overrides section 74 in certain cases by allowing relief for other ‘non-trade’ debts under the ‘loan relationship’ rules of section 82 Finance Act 1996 et seq .

Conlon Construction Limited was in business as a civil engineering contractor but it also owned 40...