Bad Debt.

[Roger Smith]

Hi,

One of my customer has went into administration last year.

I’ve tried but were not going to get anything back. I have to do the annual return soon.

I was wondering if I could claim the odd “£2000” odd back as bad debt against my taxes or something simlar? Is there anything constructive i can do with the bad debt?

FYI I own a LTD company.

Regards

Roger

[Jenni384]

If this is a bad debt and you have written it off your ledger you can indeed 'claim it back'

The double entry is debit Bad Debt Expense (an expense in the P&L) and credit Debtors (Sales ledger, asset in the balance sheet). This will therefore reduce your taxable profit by £2000.

What this says is that you no longer hold this £2000 as an asset (money that's going to come in) but that you've written it off to bad debts.

The original sale of £2000 will still show in turnover, but the effect of showing it as an expense also, will net the transaction to Nil, meaning no tax payable by you on the sale.