Bad debts and tax
February 15th, 2010
If your business is showing signs of the recession through unpaid customer balances, you may be able to claim tax relief on some of those balances. If, after a reasonable and proportionate attempt to recover money owing to you (including court action if appropriate), the debt looks unlikely to be paid, you can write it off (net of VAT) against your profits. It is possible to review your debts right up to the point when you finalise your accounts and claim tax relief for debts which have gone bad subsequent to your year-end.
If your customer pays you after you have claimed tax relief, you will need to include that payment as income in your next tax return and pay any tax due on it.
The content of this article is for general information only. It should not be relied on and action which could affect your business or personal circumstances should not be taken without appropriate professional advice.
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