Hi I need a bit of help please, we used to have a worksop that we had to give up we owe 2.5k in arrears which we are currently paying off at 250pcm from my wages. The business so far is managing well and we managed to make a payment of 500.00 towards the debt from out business bank account the question is what do i charge that to bad debt?
Can I ask for some clarification here please?
What type of business is it - a limited company, sole trader, etc.? What is your role in this business (e.g. director)?
When you say that the debt is being taken from your wages, what exactly is the scenario here? Is it that your payslip reflects the debt being taken (e.g. a court order/attachment of earnings order), or is it that you take the full wage and then pay the debt from there? Or is it more of, rather than being paid £1,000, you’re only taking £750 and paying the other £250 to the creditor rather than paying it to yourself?
apologies for the late reply, basically what it is is i take my wage and pay the debt from there.
this is my partners business a sole trader, the workshop failed and as i was the only one with any means i am paying the debt
his business is now picking up and he paid the installement from the business account and now i dont know how to tag it
I’d suggest it’s not a bad debt if its being repaid.
2nd I’d suggest that if you are funding his repayments then you are effectively lending the money to him. What you need to decide is whether the money is actually a loan or a gift to him personally, and then go from there.
the debt stands at 2.2k and he intends to pay it from the business account
What is the debt for? Rent, supplies, something else? And is it entirely your partner’s business or was the workshop run by both of you?
If it is a business debt and he is now paying it form the business account, then either the debt is sitting in his accounts as a creditor, and you need to tag it to that creditor to reduce the amount owed.
Or, if it hasn’t been set up as a creditor then you need to tag the payments to rent, supplies, or whatever other expense it relates to.
As for the amounts you have paid, as @Paul_Courtier says, these are effectively loans from you to the business. They can also be put through the business and charged to the same place as the payments made from the business account, the other side would just be proprietor’s own funds (assuming you are not asking him to repay you).
If you do expect him to repay you, then the other side would be a loan from you in creditors.
Thank you apologies for late reply was away.
This is a workshop that as the business failed I had to take on the arrears for. It was orginally paid for by Santander business account which has now shut.
I dont want him to repay me as he has now taken those arrears on himself now things have picked up for us.
I will do as suggested tag the payment to rent thank you both for the help its much appreciated
Just to clarify - this assumes he was in business as a sole trader and still is? And is he essentially carrying on the same trade or is it a completely new business doing something entirely different?
If it’s totally different or he’s switched from a limited company to sole trader for example, he won’t be able to claim it as a business expense.
He will need to show the two businesses separately on his tax return, unless he’s still trading under the same name.
yes he is still a sole trader and it is the same business but now he operated from home rather that having a yard
Perfect - then it’s fine to claim it as a cost of the business.
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