Income Tax: Bad debts

brophs

Hi,

I've had a quick search and I couldn't find a thread which dealt with this fully.

I am self-employed. I have been self-employed since 2006. In that time I have built up a reasonable amount of outstanding debt. The nature of my business is that fees can be paid years after they arise. Or, as is often the case, it becomes apparent that they are never going to be paid.

I'm just curious how those are taken into account in a P & L account and an Income Tax return. At present I do my own returns, as it is very straightforward, but I'm wondering how I go about making provision for bad debts this year.

To use round figures, say I earned €20k, on which my net profit was €10k. I have bad debts of approximately €10k. How do I factor in the bad debts figure in those circumstances?

Obviously, should this be too complicated for me, or something best left in the hands of a professional, I'll do that, but I'm just curious if it's something I could account for myself.

Thanks in advance.

Alan Shore

Specific provision for bad debts are reflected in accounts and are deductible for tax.

Make sure they are specific and a 10k provision in a year when the profit is only 10k would look a bit odd.

dbran

Hi

I would also add that if the individual bad debts are large, that you may be asked to show how you attempted to collect the debt, solicitors fees, correspondence etc. otherwise there is nothing to show you didn't just touser it.

Regards

dbran