Bad debt provision - which box?

Bad debt provision - which box?

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It is well known that bad debts written off in the sales ledger are tax-deductible in the accounting year during which they are written off. A general provision is not allowable. However, a specific provision for which there is evidence that as at the accounting date the debt was unlikely ever to be paid, is allowable against the profits for the period then ended, even if the debt is not written off. The Revenue manuals confirm this analysis.

The self-assessment return states at Box 26 "Irrecoverable debts written off". The Table of alowable expenses at SEFN 6 states that box 26 should include "Amounts included in turnover but unpaid and written off because they will not be recovered". The table of disallowable expenses at SEFN 7 states that "general bad debts" should be disallowed.

I feel that the guidance in the tax return itself and the notes is misleading in that there is no mention of the fact that some provisions are allowable, even if the debt is not actually written off in the sales ledger.

I realise that the sensible thing to do would be to include the specific provision in box 26 and to make a white space note indicating that the debt was not written off but was an allowable specific provision.

Do others agree or have I missed something in the official guidance?

John R

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