There are only three circumstances in which a deduction may be claimed, in calculating trade profits, in relation to bad debts (ITTOIA 2005, s. 35):

if the debt is in fact bad;

if the debt is estimated to be bad, or

if the debt is released wholly and exclusively for the purposes of the trade as part of a ‘statutory insolvency arrangement’ (as defined at ITTOIA 2005, s. 259).

Where only part of a debt is bad, or estimated to be bad, a deduction may be made for that part only.

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