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Cash basis return for bad debts

Cash basis return for bad debts

hi everybody.

I may have a new accounting client who has not done her 2010/2011, or 2011/2012 tax return. Tut tut.

In 2010/2011, they invoiced their client (april to dec) a total of £50K. During the year they only received £20K of it. No payments received against this debt in 2011/2012 and in 2012/2013 the company is potentially putting this debt into a CVA.

Now - we need to play catch up with the 2010/2011 tax return which will show income of £50K and potentially the 2011/2012 will show a bad debt cost of £30K. It seems unfair to have to pay tax on money never received.

So my question then is, could my client do the 2010/2011 tax return on a cash received basis, and if she ever receives any payment on the rest of the income, declare that in the tax year of receipt?

Thank in advance.


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