tax consequence of release from debt
In the first instance these would follow the accounting treatment accorded to the transaction.
Release of the whole or part would be revenue and as such would be chargeable to tax.
The more important aspect is therefore the prudent accounting treatment which must recognise and reflect any uncertainties as to a future reversal of the lender`s consent for the release from full indebtedness. In this situation Pinnel`s Case (1602) 5Co Rep.117A, also known as Penny v Cole is of crucial relevance. I would therefore consider it a must to seek legal opinion before making any decisions and to consider whether the release be spread in instalments over a number of years or be carried in whole on the Balance Sheet for a minimum period prior to full release to P & L.
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