Debt Release - Land Dealers and Developers

Section 18 of the Finance Act 2013 introduced a new section 87B into the Taxes Consolidation Act 1997. This new section makes provision for the release of a debt, in certain circumstances, to be treated as a receipt of income and, consequently, chargeable to tax.

The aim of the provision is to ensure that individuals engaged in the trade of dealing in and developing land do not obtain the benefit of losses for tax purposes when they have not, in fact, incurred any economic loss. It is of no relevance in situations where other business or personal debts are written off.

Instructions and examples illustrating the way in which the provision is intended to operate are contained in a new manual Part 04-06-22 of the Income Tax, Corporation Tax and Capital Gains Tax Manual.

The instruction also sets out the time at which the debt release is deemed to have taken place, including the circumstances of bankruptcy and personal insolvency.

30 April 2014