[Carl2009]

Quite a simple question - anybody know if you can offset custies who owe you and where the debt is irrecoverable against tax. I'm not VAT registered (if that makes a difference).

Cheers

[AuRavelling79]

Yes.

[daz1977]

u can also carry debt over to other tax years, a good accountant should sort it for you

[windymiller]

If memory serves me correct i think you can only do it after you havnt been paid for the job after six months, if im wrong im sure someone will correct me 

[Paul Coleman]

If memory serves me correct i think you can only do it after you havnt been paid for the job after six months, if im wrong im sure someone will correct me 

I'm not saying you're wrong because I'm not certain but I think you have to wait until the following accounting year before offsetting it (I may well be wrong though).  VAT is different.

[Moderator David@stives]

Welcome back Paul

[Paul Coleman]

Welcome back Paul

Thank you Dave 
I prefer it with real names

[martinsadie]

if you dont get paid dont put it down in your earnings

[mark dew]

if you dont get paid dont put it down in your earnings

Thats what i do. I put in the milage though.

[Sure Cleaning]

I cant see how you can claim for bad debt.

If I clean a customers windows say £50 and they do not pay me....I can not claim tax relief on the £50.

I can claim all expenses involved in cleaning that house, ie fuel, water etc.  But not the profit.

If you were allowed to claim the full debt, then you might aswell charge customers £500 per clean and when they don't pay claim tax relief on £500...Some how dont think tax man will allow that.

When it came to my tax return as Stan said you do not put you earnt £50 for that house. If however, you have put on your tax return that you have been paid that £50 and then do not get the money from customer then you would claim bad debt as you would have paid tax on money you did not earn.

An accountant would be best person to clarify.

[daz1977]

sure clean is right go see a good acountant, i think you might need proof work was carried out

there is a way of moving loss/debt to other tax years and righting it off against tax,  this is what a lot of the banks who got gov help are doing, so they dont have to pay back the loans quickly

[matt]

if you dont get paid dont put it down in your earnings

ditto

[daz1977]

heres a link that  might help you

to help you claim it back you have to do accrual form of accounting (report it when you earn it rather than when you receive it). Most small business owners do not do this, nor should they

http://www.consumeractiongroup.co.uk/forum/legal-issues/132571-bad-debt-write-off.html

[Sapphire Window Cleaning]

Quite a simple question - anybody know if you can offset custies who owe you and where the debt is irrecoverable against tax. I'm not VAT registered (if that makes a difference).

Cheers

You only pay tax against what income you get in, if you dont get paid from a customer that is not income.



Matt

[Carl2009]

That seems about right Matt - if I don't get it I don't declare it, so there is nothing to "claim".

It's just that there seems to be no way of accounting for the costs associated for doing a job. I'm owed £280 from one particular gutter/fascia job from Nov that I haven't been paid for; i'm pursuing through the courts and am at baillifs-going-in stage. But if they don't gain access and can't seize anything i'm down not only the court costs but the costs associated with doing the job. I can obviously claim any court / solicitors costs I have borne against tax, but it's just a general point - surely there should be some element from unpaid jobs that can be written off.

[daz1977]

if the court give you an order to seize the goods then the bailiffs can go in,  i think it is called a  collection order,  if you get fined now in court for say a speeding offense they automatic put a collect order on it so if you miss a payment then bailiffs are called, saves the courts taking you back to court,   ask for a collection order and not just to ccj the person as ccj are nothing,  if you only get a ccj then you will have to send bailiff to ask for the money and the person is usually given 28 days to pay,  all the bailiff can keep doing with out a collection order is to ask for payemnts and stick charges on, 

a tip once the debt gets to over 700 or 800  i think, u can go for a bankrupts order on the person, you have to apply for it,

[Ian Rochester]

It depends upon whether or not you are doing your accounts as Cash or Accrual based accounts, Cash accounting only declares income when it is received and when expenses when they are paid.

The Accrual accounting include items when they are earned (though not necessarily paid) and also claims expenses when they are incurred (again not necessarily paid)

We use George for our window cleaning business and work on the "Payments Received" as opposed to the "Work Done" for accounting (Cash Accounting).  The year end financial report will also detail any "write offs" for the year, this makes it very simple for year end information.

With our other cleaning we work on Accrual accounting and therefore need to accrue for any bad debts at the year end which then comes off the bottom line.

Hope that makes sense.

[Spruce]

This is interesting.

Surely your business is all about profit and loss. After all, in accounting you have a profit and loss account. Technically, a bad debt is a loss and can be claimed as such, along with fair expenses incurred whilst trying to recover that debt. For a one man business, its probably easier not to account for it to begin with and just walk away, but what happens if you have an employee who you have paid to do the clean? If the amount owed is £50.00 and you have paid your staff £20.00 to do the clean your loss is still £50.00. If you contracted an outside debt collecting agency to collect on your behalf, they would recover the debt + expenses, so you would not be in debt any longer. If they failed to collect the debt and charged you £25.00 expenses then your loss is £75.00 - that comes of your bottom line on your profit and loss account. The £50.00 would be included in your turnover for the day, but the none payment entry may come several months later as a debit (being written off). But you would need to put a note into you paper work for that tax year detailing the loss (date work done, expenses incurred and date the debt was written off) incase of a Receiver investigation.

You are not claiming it against tax. The tax man is not giving you anything towards your bad debt.  If you were paying tax on an annual turnover of £1000.00, you would only now claim turnover of £925.00 and would pay tax on the new figure, but you are still out of pocket by £75.00. The end result is the same as Matt's for not bothering with it in the first place, but the Receiver loves a paper trail, especially if there are other incurred expenses you are claiming that are directly linked with this case.

Ditto Ian.

Bruce

[Ian Lancaster]

It depends upon whether or not you are doing your accounts as Cash or Accrual based accounts, Cash accounting only declares income when it is received and when expenses when they are paid.

The Accrual accounting include items when they are earned (though not necessarily paid) and also claims expenses when they are incurred (again not necessarily paid)

We use George for our window cleaning business and work on the "Payments Received" as opposed to the "Work Done" for accounting (Cash Accounting).  The year end financial report will also detail any "write offs" for the year, this makes it very simple for year end information.

With our other cleaning we work on Accrual accounting and therefore need to accrue for any bad debts at the year end which then comes off the bottom line.

Hope that makes sense.

Perfect sense.

People seem hell bent on making things as difficult for themselves as they can.

K.I.S.S.

"Keep it simple, Stupid!"


You accounts should show ALL THE MONEY YOU HAVE ACTUALLY RECEIVED and ALL THE MONEY YOU HAVE ACTUALLY SPENT ON LIGITIMATE THINGS LIKE EQUIPMENT, FUEL, TELEPHONE ETC ETC.

The difference between what you have received and what you have spent is your GROSS PROFIT.

From that you work out how much tax you pay by deducting your personal allowance and applying the relevant tax rates to what is left.

So: only record the money you receive
              record all the money you spend on business expenses (with invoices to prove it)

There's no such thing as 'claiming tax back' in this sort of system. 

If you don't record the money till you get it, there can't be any bad debts

[Neil Williams]

Ian, I'm surprised you bothered to reply to this.
How basic do things have to be, money BROUGHT in goes in one column, money SPENT out goes in another column. What is left is what you get taxed on. End of.