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CTA09/S367

Subsequent recovery: apportioned example

In the example at CFM35670, JL plc and TR Ltd both had their impairment restricted by group relief claimed by their group. In the following period

• JL plc regards the 拢30,000 debt as recoverable
• TR Ltd reduces its bad debt provision by 拢60,000.

The recovery credits, which would otherwise be taxable, are reduced under CTA09/s367 as follows.

The total amount of recovery credits is 拢90,000 (assuming no further write-downs, so this is the net amount).

Under section 367 the taxable recovery credits are reduced by the cumulative impairment restriction brought forward, 拢40,000.

The reduction in recoveries is apportioned between JL plc and TR Ltd as follows.

JL plc's recovery reduced by聽 (拢40,000 x 拢30,000) / 拢90,000 = 拢13,333, so taxable credits 拢16,667.

TR Ltd's recovery reduced by (拢40,000 x 拢60,000) / 拢90,000 = 拢26,667, so tabable credits 拢33,333

Of the 拢90,000 recoveries, 拢40,000 is covered by the impairment restrictions, leaving net recoveries of 拢50,000 to be taxed.

There is no longer a cumulative impairment restriction to be brought into future computations.