Q. My company is coming to the end of its financial year and we have a number of debts which are outstanding. We don't want to throw good money after bad pursuing debtors who won't pay and we are therefore considering writing the debts off. What do you recommend?
A. There are benefits to writing off debts that have no prospect of being paid in that you can recover the VAT on the unpaid debts and offset the debts against your company's profits (and therefore will obtain tax relief). However, each debt is different and you need to treat each debt on an individual basis. Before writing off a bad debt you should always consider whether taking court action, either through the County or High Court, or serving a statutory demand (which carries the threat of insolvency/bankruptcy for the debtor) would be likely to recover the monies due.
Of course, if the debtor is already in financial difficulties then there is a risk that you could be wasting your time and money in pursuing the debt. You should therefore check if the debtor is still trading at Companies House or the Insolvency Register and check whether they have other judgments against them, before deciding what to do.
If you decide to take court proceedings and win, then we suggest that you enforce the judgement through the High Court Enforcement Office (as they have more powers than County Court Bailiffs). Should enforcement be successful, the court fees and enforcement costs will be added to the amount paid by the debtor.
For specialist advice contact Keith Swan of Patterson, Glenton & Stracey Solicitors by email at ks@pgslaw.co.uk or by telephone on 0808 231 7043. Patterson, Glenton & Stracey Solicitors have provided legal advice to the people of South Tyneside for over 125 years. For details of their full range of services and to view previous Gazette articles please log on to www.pgslaw.co.uk . Patterson, Glenton & Stracey Solicitors: The Logical Answer.
