Bad Debts Question

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numberjunky
numberjunky Registered Posts: 88 Regular contributor ⭐
in AAT Level 3 (Level 6 in Scotland)
Precisely when can you legally write off a bad debt from your accounts?

I thought it was SIX MONTHS after the debt was due, but my tutor says it is possible to write a bad debt off ANYTIME.

Assume VAT is not involved.


FRA Student

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  • sebastianforbes
    sebastianforbes Registered Posts: 172 Dedicated contributor 🦉
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    i believe that you can write off a bad debt anytime you like.

    a provision for bad debts is for debts over the coming year (maybe 6 months, i'm not too sure).

    only the adjustment to prov4b.d. affects the bad debt expense in the profit and loss.

    one of the frc, asb or ssap states that you must consider future recoverability of debts.

    please feel free to shoot me down if i'm wrong.
  • blobbyh
    blobbyh Registered Posts: 2,415 Beyond epic contributor 🧙‍♂️
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    It's six months before you can write off a bad debt and reclaim the VAT;

    Check here; http://www.businesslink.gov.uk/bdotg/action/detail?type=RESOURCES&itemId=1073790802

    EDIT; having re-read the original post, if your tutor is not reclaiming VAT then that might be why they said you can write it off at anytime.
  • sebastianforbes
    sebastianforbes Registered Posts: 172 Dedicated contributor 🦉
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    reclaiming the vat was not the question ;-)
  • sebastianforbes
    sebastianforbes Registered Posts: 172 Dedicated contributor 🦉
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    oops, we both thought exactly the same thing at exectly the same time :-D
  • sebastianforbes
    sebastianforbes Registered Posts: 172 Dedicated contributor 🦉
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    exactly... someone please shoot me !
  • numberjunky
    numberjunky Registered Posts: 88 Regular contributor ⭐
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    Bad Debts

    I think that answers the question. I was getting confused with writing off a bad debt whilst reclaiming VAT hence the six month wait. It appears that it is possible to write it off at anytime.

    I guess a situation could arise where a customer goes into liquidation a short time after placing an order giving the business a valid reason to write the debt off.

    All clear now thanks.

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