Self Employed - Bad Debt Tax Reclaim

akiller

Hi All,

I have spent a fair amount of time searching this forum and others to try and get an answer and I'm still not too sure.

I used to be self-employed and have an outstanding invoice from the 2010/2011 tax year for ~£500. This was included in my tax return and I paid tax on it. Chances are I'm now not going to be paid this so I'll have to write it (or at least part of it) off as bad debt in my 2012/2013 accounts when I come to doing them.

This is fine, however because my primary income is now via PAYE I rarely do any self-employed work which means my self-employed income during 2012/2013 is far below the earnings threshold.

So my question is: as I don't really have any earnings to write this bad debt off against (and I suspect I won't any time soon) can I actually reclaim the overpaid tax another way so it ends up back in my account?

I know it's only ~£100 but it's still £100 I shouldn't have paid and which I would rather have earning terrible interest in my account than HMRC's (another issue ).

Thank you.

Nicola_Ed

Hi - a couple of questions before I can reply. Have you ceased trading and confimred this with HMRC? Which earnings threshod are you referring to?

Elaine_Wilson

What was your self employment income in 2012/13? (I ask because I'm uncertain what you mean when you refer to the "earnings threshold")

As long as you are still in business, even at a very low level, you can claim relief for the bad debt. Assuming this turns the trading result into a loss then you can carry the loss forward against future self employment profits.

How long will it take you to earn £500 in the business?

Alternatively, if you write off the debt in the 2012/13 year the you can offset any loss created against your PAYE income.

Edit - Sorry, I went to get a cup of tea before typing my reply. Didn't see the post above until I'd pressed submit.

akiller

Nicola_Ed wrote: »

Hi - a couple of questions before I can reply. Have you ceased trading and confimred this with HMRC? Which earnings threshod are you referring to?

I keep the self employed business open for the odd bit of work I might do, which is why I doubt it'll ever go over the personal earnings threshold on its own.

Elaine_Wilson wrote: »

What was your self employment income in 2012/13? (I ask because I'm uncertain what you mean when you refer to the "earnings threshold")

As long as you are still in business, even at a very low level, you can claim relief for the bad debt. Assuming this turns the trading result into a loss then you can carry the loss forward against future self employment profits.

How long will it take you to earn £500 in the business?

Alternatively, if you write off the debt in the 2012/13 year the you can offset any loss created against your PAYE income.

Edit - Sorry, I went to get a cup of tea before typing my reply. Didn't see the post above until I'd pressed submit.

Sorry about that, tax makes my head spin!

Self employed income in 2012-2013 was roughly £700 and I'd (possibly, hopefully I won't have to) be looking to write off a £500 bad debt from 2010-2011. Factoring in other various expenses I'd still have a positive profit for the year.

I couldn't say how long it would take to earn £500. It's very much a case of I only do self employed work when someone asks me to do a project for them.

When I submit my tax return if I earnt say £12,345 from PAYE and £700 from self employed with a £500 bad-debt my total profit is ((£12,345 + £700) - £500) = £12,545 leaving £200 (£12,545 - £12,345) left to pay tax on thus 'reclaiming' (by not needing to pay for; for want of a better word) the written off figure?

Hopefully that makes sense.

zygurat789

akiller wrote: »

When I submit my tax return if I earnt say £12,345 from PAYE and £700 from self employed with a £500 bad-debt my total profit is ((£12,345 + £700) - £500) = £12,545 leaving £200 (£12,545 - £12,345) left to pay tax on thus 'reclaiming' (by not needing to pay for; for want of a better word) the written off figure?

Hopefully that makes sense.

Or, alternatively;

When I submit my tax return if I earnt say £12,345 from PAYE and £200 from self employed with a £500 bad-debt my total income is ((£12,345 + £200) - £500) = £12,045. If this is claimed on the tax return there will be a repayment of £60.


Hopefully that makes sense

akiller

zygurat789 wrote: »

Or, alternatively;

When I submit my tax return if I earnt say £12,345 from PAYE and £200 from self employed with a £500 bad-debt my total income is ((£12,345 + £200) - £500) = £12,045. If this is claimed on the tax return there will be a repayment of £60.


Hopefully that makes sense

Ah, thanks. I think that's what I was trying to describe in a roundabout way.

I didn't realise it worked like this with regards to adding them both together so in that case all it good .