Commercial debt forgiveness



This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

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Generally, an amount which you owe is a commercial debt if you can claim a deduction for the interest paid on the debt or you would have been able to claim a deduction for interest if it had been charged. The amount of the commercial debt includes any unpaid interest.

If a commercial debt is forgiven, you may be required to reduce expenditure deductible under the UCA by all or part of the net forgiven amount. If the reduction of deductible expenditure is to be made in relation to depreciating assets whose decline in value is calculated under the diminishing value method, it reduces the base value from which the decline in value is calculated or, if under the prime cost method, it reduces the cost from which the decline in value is calculated. If the prime cost method is used for the income year in which the change is made and in later years, you need to use the adjusted prime cost formula-see Methods of working out decline in value.

Last modified: 01 Jun 2005QC 27399