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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4885
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Hi, I have a question regarding old debt

Resolved Question:

Hi, I have a question regarding old debt.

We have a number of outstanding invoices which we issued to our clients that we finally wish to write off as bad debt.

In the previous period these were declared as debt.

How should we declare them in this period?

Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.
Hi
Thanks for your question, I am Sam and I am one of the UK tax experts.
Can you advise what dates these outstanding invoices relate to
What tax year accounts these are relevant for and your start and cessation date for the accounting period
Confirm that you have previously claimed them as debts (or did you mean declared them as income)
What you have done to try and recoup these monies
Thanks
Sam
Customer: replied 2 years ago.

They come from several previous periods and each has its own story.

They were in our list of invoices and they were added to the company's turnover. As an asset they were declared within the debtors field (AC52 in the CT600).

This year we need to write them off and we are not sure how to do this in the CT600.

Expert:  Sam replied 2 years ago.
Hi
Thanks for your response
As long as you have evidence of the fact you have undertaken every avenue to cover the amounts owed and the debt is more than 6 months old, then you can make the claim.
Then as you already compute the tax-adjusted profits/losses separately - i.e. you make adjustments for depreciation, capital allowances, non-allowable entertaining etc in this case you also include the bad debt within this total computation as it is only the resultant tax profit/loss that is entered in the CT600.
Also remember to amend any VAT position that might also have been relevant.
Thanks
Sam
Customer: replied 2 years ago.

The CT600 we have includes the accounts section. Where should it go in there? Do we exclude it from debtors (AC52) and/or include it in expenses (AC20)?

Customer: replied 2 years ago.

I would like to add some background to this question.

As we have a number of outstanding invoices that clients refused to pay or they are bankrupt we would like to remove this from the balance sheet and also lower our tax bill (CT) for this current year.

The nature of the question is technical.

Where in the 'accounts' section of the CT600 do we add these figures and where (if) we need to add these figures in the 'CT600' section so we can lower our tax bill. I need specific fields such as AC123 etc.

Kind regards

Expert:  taxadvisor.uk replied 2 years ago.
Hello and welcome to the site. Thank you for your question.

Please advise if you are still looking for help in accounting/reporting of bad debts within CT600 reporting.

Many thanks
Customer: replied 2 years ago.

As my question has not been answered please see below.


As we issued a number of outstanding invoices(all of which are from previous periods and are included in the debtors field of of previous submissions[AC52]) that clients disputed and did not pay or they are bankrupt we would like to remove this from the balance sheet and also lower our tax bill (CT).


The nature of the question is somewhat technical.


Where in the 'accounts' section of the CT600 do we add these figures and where (if) we need to add these figures in the 'CT600' section so we can lower our tax bill. I need specific fields such as AC123 etc.

Thanks

Expert:  taxadvisor.uk replied 2 years ago.
Thank you for your reply and explanation.

I presume there was no provision made for doubtful debts in previous accounting years and that trade debtors reflect full value in balance sheet before any adjustments.
This is what I would do to reflect entries on CT600 return...debts being written off in current year of reporting

In the accounts section of CT600 return -
Include bad debts within Administrative expenses Box AC20 and also reduce your debtors Box AC52 by same amount.

When you complete Computations section - expenses
Input bad bebts in Box CP26..

The above entries would take care of bad debts and reduce your taxable profits to lower your CT bill.

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 2 years ago.

If we do that, will it not have a double effect? By adding to our expenses and also reducing the amount of debtors it seems like the total assets will be reduced by double the amount of bad debt.

Expert:  taxadvisor.uk replied 2 years ago.
Thank you for your reply.

One set of entry is reducing your profits (albeit profits generated in previous years) by creating a bad debt for irrecoverable amounts. This reduces your profit and loss account.

The reduction in debtors in reflecting what cash would be received by the company if all remaining debts were paid in full.

There is no double counting. For every debit entry there should be a corresponding credit entry .. basic rules of book-keeping.

I hope this is helpful.
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4885
Experience: FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
taxadvisor.uk and other Tax Specialists are ready to help you
Expert:  taxadvisor.uk replied 2 years ago.
I thank you for accepting my answer.

Best wishes.
Customer: replied 2 years ago.

Already rated

Thank you for the prompt and clear replies

Expert:  taxadvisor.uk replied 2 years ago.

Thank you....

Please don't respond to this posting.

it is for information only.

Many thanks

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