Compensation Payment

T.C. Registered, Tutor Posts: 1,448
My client has paid a plumbing company to work at a new property installing all plumbing and heating and has paid them.
The plumbers have messed up and now need to pay my client approximately £2,000 in compensation, which they have agreed.
How do I show this? Should it be as a credit against the original invoices from the plumber or should it be shown in another way? Presumeably no VAT would need to be charged - it is a new build zero rate property!
Your input would be appreciated.


  • peugeot
    peugeot Registered Posts: 624
    You could post it against the expenses or you could show it as other income.

    Kind regards
  • T.C.
    T.C. Registered, Tutor Posts: 1,448

    If I call it income, then what about the VAT, can this still be zero rated?
  • rjww85
    rjww85 Registered Posts: 20 Dedicated contributor 🌟 🐵 🌟
    Compensation should not have VAT on it, as it is similar to an isurance claim receivable.

    You could either show it as

    1) A credit in the expense nominal where the original invoice/payment was posted.


    2) A credit in other income nominal labelled 'compensation receivable'. Hope this helps
  • T.C.
    T.C. Registered, Tutor Posts: 1,448

    Thanks. That is very helpful! :thumbup:
Privacy Policy