Bad business debt can deadlock business growth. If you are running a business that is being held back by bad debt perhaps tax relief could help? By reducing the impact of debt on your business you could help boost your longer-term business growth plans?
This article will help highlight what you could claim and when you should consider such relief.
Lost Time Really Means Lost Tax – Bad Business Debt
Nobody wants to pay tax on sales that are still outstanding in terms of cash repayment. If you have not received the cash, you haven’t really made a sale. But in the tax system, you have made a sale and a tax charge is due. So, you need to claim a deduction as soon as you identify the debt.
Many companies sweep debt-related tax payments under the carpet. They shouldn’t and neither should you. You should act immediately and stop handing money over to HMRC for nothing whatsoever. You need to immediately review your debtor position to identify potential relief deductions for your business.
You Need To Be Specific
Once you begin your journey towards identifying debtors and the deductions that are required you need to understand that you cannot guesstimate these details. You cannot bundle all your debts together for the sake of averages. You need to identify the bad debt and in each individual case, you need to consider the right approach to each individual debt.
In conclusion, it should be a priority to identify debt thereby maximising the potential for tax relief for your company’s bad debts. This should be done before you sign on the dotted line for your annual accounts. Check and review all your included debts. Your company’s understanding of historical debts may have changed, and you could be able to apply relief to bad debt. You could have been under the impression it wasn’t a bad debt during earlier trading quarters.
Once you have identified a debt, you can then expense it in your accounts – you can do this right up until the annual accounts are signed and finalised for Companies House. So, take time out to review your debt situation and identify problematic debts early – this can help you save on tax payments later.
This article is provided as an outline only and does not constitute financial advice. If you would like to discuss your own unique business needs, why not get in contact with Prestige Business Management today? Call us on 0203 773 2927 to find out more about bad debt tax relief.