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Readers' forum: Bad debt

07 August 2018
Issue: 4659 / Categories: Forum & Feedback

VAT on tools sold to settle a business debt.

For many years a client who is a flooring contractor (limited company) used the services of a subcontractor who always had financial problems. The company would often loan the subcontractor money to help him out and the total debt increased to £12 000 over three years. The loan was shown as ‘other debtors’ in the accounts.

However the subcontractor disappeared about 18 months ago and has not been seen since (rumour has it he is now living in Spain) but he left all his tools and equipment at the unit owned by my client and these items had a high value.

After 12 months my client did a deal to sell the equipment for £7 000 cash which he deposited in the company bank account to reflect a part-repayment of the loan. He reduced the ‘other debtors’ balance by £7 000 and wrote off the...

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