Help - being messed around by HMRC and debt collection agency :-(

InsideInsurance

Evidently not many know how the tax system works.... tax is paid using accruals and therefore you pay your tax on the invoice you raise not on the payment you receive!

Where this changes, as has been mentioned, is when it becomes a bad debt (generally over 6 months over due).

When you are running your accounts you should work on an accrual basis too, so if you raise an invoice it is at that point that you need to put aside the money that will be due for the relevant taxes not at the point of receiving the funds. Evidently this is challenging when first starting up or when you are growing the business but then business never has been easy.

There has been suggestions that things should change from accruals to actuals but that would be a massive change and whilst many would support it it would take a lot of effort to roll out

LittleMonkeyPops

Hi everyone,

For a bit of an explanation please see my post in the CAB forum.

This is simply a case of the really harsh lesson about running your own business and the importance of cash flow - don't let customers rack up any debt to you, no matter how trustworthy they might seem, i.e. if they've lived locally for many years and are the Chair of the Finance Committee for the local Parish Council as this is no guarantee that they won't fleece you for £10k.:mad:

He's learnt the hard way. He's also worked extremely hard to pay off his suppliers and repay HMRC, they just didn't seem to want to communicate with us and even though we found a nice man on the other end of the phone in July who actually advised us on the process of requesting a repayment (no-one else did even though we wrote 8 letters requesting to do so previously and asked via telephone too!) they automatically passed the debt to the debt collection agency.

I have just spoken again to the debt collection agency and can report that they have accepted a new offer and that they have also said HMRC will accept it too. :jWe have everything crossed that this one isnt cancelled next month like the last one was!