Taxes Consolidation Act 1997 section 87

Debts set off against profits and subsequently released

Section 87 deals with the tax treatment of debts that were previously allowed as deductions but are subsequently released, treating the released amount as taxable income of the trade or profession.

• Where a debt incurred for the purposes of a trade or profession has been allowed as a deduction and is later released, the amount released is treated as a taxable receipt of the trade or profession.
• The released amount is treated as arising in the period in which the release takes place.
• If the trade or profession has permanently ceased before the release occurs, the released amount is treated as a post-cessation receipt under section 91.
• This provision ensures that a tax benefit obtained from writing off a debt is reversed when the obligation to pay is subsequently forgiven or released.