Write off loss?

[lorettacritchet]

Hi does anyone know if you can actually claim for clients who don't pay and have run off as a bad debt in your yearly accounts?

thanks

[rickysmiths]

Hi does anyone know if you can actually claim for clients who don't pay and have run off as a bad debt in your yearly accounts?

thanks

This was answered by MR A in another thread in which you took part wasn't
it???

This one: http://childmindinghelp.co.uk/forum/showthread.php?t=106301

[lorettacritchet]

I had tried to get a reply during this thread but didn't. Besides it sounded like a completely different situation. I have not gone through the court process, just obviously had laid out dinner costs, petrol etc after looking after this girl.



This was answered by MR A in another thread in which you took part wasn't
it???

This one: http://childmindinghelp.co.uk/forum/showthread.php?t=106301

[blue bear]

Mr a answered it really well, unpaid bill was bad debt, cost of chasing was something else can't remember now, go back to tge other post I'm sure it gives you tge answer.

[Chatterbox Childcare]

I understand it that you put the income due in income to claim the wear and tear and then put the same amount in expense to write it off. Note that if the parent pays you in the following year you need to put it back in your accounts as income again in that year

[lorettacritchet]

Thanks for that. I am never any good at this financial or tax stuff. Didn't under Mr A's reply nor how everyone has said it was easy to understand! Ok so if understood correctly, if you don't put it in the income received then I can't do anything about it. I am owed £600 quid, woman never paid me and ran off. I only ever put income received collating that information from my receipt book not what I am expecting to receive. According to accountant, I am not allowed to class it as a company loss.



I understand it that you put the income due in income to claim the wear and tear and then put the same amount in expense to write it off. Note that if the parent pays you in the following year you need to put it back in your accounts as income again in that year

[Chatterbox Childcare]

Thanks for that. I am never any good at this financial or tax stuff. Didn't under Mr A's reply nor how everyone has said it was easy to understand! Ok so if understood correctly, if you don't put it in the income received then I can't do anything about it. I am owed £600 quid, woman never paid me and ran off. I only ever put income received collating that information from my receipt book not what I am expecting to receive. According to accountant, I am not allowed to class it as a company loss.

Sorry what do you mean by this?

Change your accountant! It is a loss and by putting it into your accounts you get £60 extra expenses because of wear and tear. Then the bad debt goes into expenses

[MrAnchovy]

I only ever put income received collating that information from my receipt book not what I am expecting to receive.

But that is wrong - you are supposed to include in your income everything that you are due to to receive for work performed. If you did that but were never actually paid, you would end up paying tax on income you have never received which would not be fair. That's why you can write off the debt as an allowable expense.

But if you never record the income in the first place, you can't then claim the expense.

[lorettacritchet]

Could I not carry it over to the next year? Technically this woman wouldn't have terminated with me until July 2012 as thats what we discussed not that means a thing.
I didn't know we had to write anything like that, thought it was just what we actually received in actual income - there's nothing on the accounts book to put in that kind of information such as a loss. I am gutted.....



But that is wrong - you are supposed to include in your income everything that you are due to to receive for work performed. If you did that but were never actually paid, you would end up paying tax on income you have never received which would not be fair. That's why you can write off the debt as an allowable expense.

But if you never record the income in the first place, you can't then claim the expense.

[Chatterbox Childcare]

You cannot carry it over. When is the money due? Before or after 31.03.12?

If it was before 31.03.12 why don't you want to put it in your accounts?

Please can you explain when the money was due to be paid as your threads are a bit confusing.

[lorettacritchet]

Sorry, money is as follows:

£220 in February
£220 in March plus £200 for termination fees.

So yes it was before 31st March - I could put it on my accounts but that won't be done until the tax year 2012/2013?



You cannot carry it over. When is the money due? Before or after 31.03.12?

If it was before 31.03.12 why don't you want to put it in your accounts?

Please can you explain when the money was due to be paid as your threads are a bit confusing.

[Chatterbox Childcare]

NO - the money was due before the end of the year so put it down as income i 11/12 and have 10% wear and tear on it. Do you think you will get the money?

If no then put through the bad debt too at the end of the year.

If you don't put down the bad debt in 11/12 you will still get the wear and tear but you will have the money included in your profit and if you pay tax this will be taxed

In 12/13 you can put through the expense and get the credit to your tax

I don't understand why you don't want to put it all through in 11/12???

[lorettacritchet]

Accountant said that i can't put through, he did my accounts....
definetely won't get money, was going to go through courts but i know this woman won't bother, she can simply claim she hasn't got the money. All of this is making my head spin


NO - the money was due before the end of the year so put it down as income i 11/12 and have 10% wear and tear on it. Do you think you will get the money?

If no then put through the bad debt too at the end of the year.

If you don't put down the bad debt in 11/12 you will still get the wear and tear but you will have the money included in your profit and if you pay tax this will be taxed

In 12/13 you can put through the expense and get the credit to your tax

I don't understand why you don't want to put it all through in 11/12???

[Chatterbox Childcare]

Accountant said that i can't put through, he did my accounts....
definetely won't get money, was going to go through courts but i know this woman won't bother, she can simply claim she hasn't got the money. All of this is making my head spin

I believe your accountant is wrong but Mr A will come along and confirm I should think.

If your accounts are finished are you paying tax? Maybe you don't need the expense and that is why he hasn't done it

[lorettacritchet]

I am due to pay £512 for the past tax year..


I believe your accountant is wrong but Mr A will come along and confirm I should think.

If your accounts are finished are you paying tax? Maybe you don't need the expense and that is why he hasn't done it

[rickysmiths]

You really need to find a good accountant that knows what they are talking about I think???:rolleyes:

[Chatterbox Childcare]

Then I think you should speak to your accountant again and ask why not? It is only a small amount but you will reduce your tax by a little bit - remember it won't reduce by the debt but the tax you are paying on the wear and tear

Approx

£440 owed x 10% wear and tear = £44.00 x 20% tax = £8.80 off of your £512

This is just rough and isn't a fortune but money in your pocket is better than money in the bank for the HMRC

[MrAnchovy]

As Debbie says the saving isn't huge - although it's a bit more as there is the NI saving too, and if the £200 is a fee in lieu of notice you can include this too so:

Additional income £640
Additional wear and tear -£64
Write off bad debt -£640

Decrease in profit £64
Saving in tax @20% and NI @9%: £19

Having said that, I would be inclined to take it to court: even if she pleads poverty she will be ordered to pay back a small amount each week, and if she was claiming the childcare element of WTC and not paying you the court will take a VERY dim view. If you plan to do this you should not write off the debt in 2011/12 so will pay a bit more tax, but if you don't manage to recover anything you can write it off in 2012/13.

It's not a lot, but if you are paying someone to make sure you pay the right amount of tax (and I would also expect them to give me some advice about recovering debts) it must be annoying to think you are paying more than you should.

[lorettacritchet]

Ok will copy this and forward onto the accountant for my arguement. I would have to find her first and they want £80 odd just to find her. I called the child tax credits and told them she was claiming when she wasn't having childcare so in some small way I got her....I hope.


As Debbie says the saving isn't huge - although it's a bit more as there is the NI saving too, and if the £200 is a fee in lieu of notice you can include this too so:

Additional income £640
Additional wear and tear -£64
Write off bad debt -£640

Decrease in profit £64
Saving in tax @20% and NI @9%: £19

Having said that, I would be inclined to take it to court: even if she pleads poverty she will be ordered to pay back a small amount each week, and if she was claiming the childcare element of WTC and not paying you the court will take a VERY dim view. If you plan to do this you should not write off the debt in 2011/12 so will pay a bit more tax, but if you don't manage to recover anything you can write it off in 2012/13.

It's not a lot, but if you are paying someone to make sure you pay the right amount of tax (and I would also expect them to give me some advice about recovering debts) it must be annoying to think you are paying more than you should.

[MrAnchovy]

I would have to find her first and they want £80 odd just to find her.

Ah, if you don't have a current address for her that does make it a lot less likely to be worthwhile :(

[rickysmiths]

Do you know for that amount and not knowing her address I would forget it.

Put it down to experience and tighten up your Fees Policy so you are never left in this position again. Make sure you always take a Deposit at the signing of the contract that is kept to the end as NCMA now advise on their new contracts. Always be paid in advance. Stop Childcare if payment is made, Also on the new NCMA Contracts.