offsetting work done, against a loan

offsetting work done, against a loan

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We lent an unconnected company a sum of money a few months back. One of their directors generated some new business for us, which was part of the agreement for lending them the money and we agreed at the time to pay them a commission on any sales generated. At the time it was expected the loan would have been paid back before any commissions were due, however that didn't happen.

We now want to set off the commission due against the loan, though can anyone suggest the best way to do this for VAT/tax purposes?

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Euan's picture
By Euan MacLennan
24th Sep 2011 10:48

Er ...

The other company invoices you for commission, with VAT added if appropriate.  The commission will be income in their accounts and an expense in your accounts.  You then set off the gross amount of the commission against your loan to the other company.

Or am I missing your point?

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