Tax Relief For Bad Paying Customers

I have a particular customer who has a history of bad payments with me. I am considering taking legal action against this customer to try and recover this debt. Can my solicitorís fees and other legal costs be regarded as a legitimate business expenses for tax purposes and are there different procedures depending on the size of the debt?

1st November 2008

Legal and professional costs that a business incurs are allowable when they directly relate to trading. Therefore the legal fees incurred in attempting to recover trade debt owed by this customer are therefore allowable for tax purposes when establishing your business profit for the year.

In addition, as it is a specific customer against which the bad debt has arisen this will be also be allowable as a deduction when establishing your business profits for the period concerned.

By Jo Nockels

Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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