When can a business write off a bad debt for tax purposes?
An analysis by Experian of millions of supposedly solvent firms that decided to close down voluntarily revealed that they are in fact leaving behind combined \’hidden’ average debts of £4.7bn each year.
This compares to the £11.7bn left by businesses that went through insolvency proceedings last year.
Obviously, in the management or firm accounts that debt is written down when there\’s even a suspicion it won\’t be paid. But what about the tax accounts?
Specifically, do you need the letter from the insolvency process to make that debt allowable as a loss?
If so, wouldn\’t this mean that too much tax is being paid?
I really don\’t know the answer which is why I ask.