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Bad debt in tax return.

I am submitting a tax return for my first year of trading as a sole trader.  I have a bad debt and am a little unclear about where to enter it on the return.  Do I add it to my allowable business expenses (cost of materials etc) used in the calculation of profit, or should it be entered elswhere?  Incidentally, the debt is definitely not recoverable.  I am doing an online return if it makes a difference to the answer.  Thanks.


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By DMGbus
20th Jan 2011 13:43

SA103 (full) - Box 26

If you are completing the "Full" self Employment schedule (SA103) then it is box 26 where the cost of irrecoverable bad debts is entered.

IMPORTANT: Do not forget that the amount should also be included in Turnover (box 14).  Box 14 is not just the money that you actually received, it's what you should have received inclusive of those irrecoverable amounts that go in box 26.

If it's the "short" SA103 that you are completing then include the bad debt cost in Box 18, not forgetting that turnover in box 8 should include not just money actually received but also bad debts that should have been settled by customers but weren't and you're now putting in box 18.



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20th Jan 2011 14:04

Bad debt in tax return

Thanks DMGbus.  Unfortunately the online form does not use the reference numbers you quoted and I can't find any obvious place to make the entry.

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By DMGbus
23rd Jan 2011 11:29

Irrecoverable debts written off

On the "full" SA103 (Self Employment turnover over £68,000 pa) schedule to the Tax Return box 26 (where the cost of bad debts is claimed) is described as  "Irrecoverable debts written off".  I've never seen the HMRC online data input screen so can't confirm if the precise terminology appears there - my exact terminology is per the paper form return.

If you can't find this box, then you'll have to put the cost in the box described "Other business expenses" or "Other allowable business expenses" (this last quote is from the "short" SA103 for businesses with turnover less than £68,000 pa.

PS. VAT has not been mentioned.  If you're VAT registered you'd reclaim the VAT and the bad debt cost would then be not the full unpaid amounts, but rather the amounts unpaid less the VAT you'd recover from them.

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24th Jan 2011 09:21

Bad debt in online tax return

Thanks DMGbus

Other allowable business expenses seems the most appropriate choice from the options offered.  I am not VAT registered so will be entering the full amount of the bad debt.

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