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Good article
I will incorporate this into my completion checklists
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Very useful thanks Steve
The "provision" aspect is one that always gets the client going and trying to find their paperwork. We had our first ever "compliance check" over related parties two months ago, it was satisfied by a simple list to back up the return but was still a wake up call.
Bad debt provisions
Steve
Thanks for the article.
I have heard it mentioned on several courses in the last year or so that there is now no distinction between specific and general bad debt provisions for companies. (Unincorporated business are still on the old rules)
The speakers have stated that, since FA 2005, any impairment for trade debts is now within the loan relationship rules and therefore any provision (whether specific or general) is allowable unless it is to a connected party.
My notes from a Finance Act 2009 course by Mercia state the following "Where a company writes off a money debt that has arisen in the course of a trade, or a UK or overseas property business, the debit in the company's accounts is now brought into the ambit of the loan relationship rules. The result is that where the creditor company is unconnected with the debtor, the creditor will get relief for the impairment either as a trading expense or as part of a non-trading loan relationships deficit. HMRC would also regard relief as being available if the debit arises from the creditor having formally released the debt"
Do you have any thoughts on that?
Fab article
Steve another fantastic article. Thanks for that we will be updating our procedures accordingly.
Thank you.
Good article to show some stroppy clients
I have one question about the very last paragraph...
If the director/shareholders "expect" a dividend every year is the treatment the same as the "expectation" of a salary bonus?
In other words can my clients prepare their March year end accounts in June and back-date quarterly dividends which they have drawn but not done the paperwork for when the accounts are done as they have always done it that way and have an "exspectation" that this will happen each year?
Loan Interest
What would be the position regarding Loan Interest and FRS12 ?
A loan would most probably meet all three criteria, namely :
- A legal obligation
- An outflow of economic benefit required to discharge the obligation, and
- The amount of the obligation can be measured reliably (in may cases to the penny)
Does FRS12 permit the total interest charge for the loan term to be relieved against profits in the first year of the loan?
What impact, if any, does UK GAAP have?
How would HMRC react ?
Thanks for any help
Regards