Taxes Consolidation Act 1997 section 87B

Release of debts in certain trades

Section 87B deals with the tax treatment of debts that are released or forgiven where an individual has borrowed money to purchase or develop land held as trading stock in the trade of dealing in or developing land.

• Where all or part of a "specified debt" (borrowings used to buy or develop land held as trading stock in a land-dealing or land-development trade) is released or forgiven, the amount released is treated as a trading receipt of that trade in the tax year in which the release takes place.
• If the trade has permanently ceased before the debt is released, the released amount is treated as a post-cessation receipt and is taxable under the rules in section 91 (Case IV of Schedule D).
• The release is treated as taking place on the earliest of: the date the lender confirms the release; the date of any agreement (formal or informal) that repayment is no longer required; the date conditions for release under a limited or non-recourse loan are first met; or the date of discharge from bankruptcy or under the Personal Insolvency Act 2012.
• This provision applies to any qualifying debt released on or after 13 February 2013, and carried-forward losses of the trade may be used to reduce or eliminate any tax charge arising.