Share this content
4

HOW TO ACCOUNT FOR RECEIPT OF COMPENSATION

Can anyone please advise

Didn't find your answer?

A client of mine has the same surname of a well known brand of which he set up a Limited company using his name.

After a few years trading the well known brand contacted him to demand he changed the company name.

After lengthy negotiations the brand as offered my client £10,000 to change the company name to which he has agreed.

I am thinking to enter it as 'other income' would this be correct? Also the company is vat registered. Should the company ask for vat to be paid on top or would it be zero rated? 

Replies (4)

Please login or register to join the discussion.

RLI
By lionofludesch
13th Oct 2019 12:48

Zero rated ?? Definitely not. What zero rating group would it fall into ?

So far as I can tell from the facts, no supply has been made so the compensation would be outside the scope of VAT.

As to where it fits in the accounts, it depends. What is the compensation for ? Did the client incur any costs for which he is being reimbursed ?

Thanks (1)
avatar
By moboffsol
13th Oct 2019 13:03

Thank you for your reply.

The compensation is for the inconvenience of having to change the company name, documents and website etc. He has also paid for legal advice throughout the process.

Thanks (0)
Replying to moboffsol:
RLI
By lionofludesch
13th Oct 2019 13:11

Definitely offset those costs against the compensation.

Thanks (0)
avatar
By WhichTyler
13th Oct 2019 15:47

Presumably there's some sort of legal agreement between the two companies: have you seen it?

Thanks (0)
Share this content

Related posts