Bad debts: where to enter an unrecoverable customer invoice

Last updated: 22 September 2026

Short version. A prepared bad-debt expense goes in Other charges. The closing debtor balance forms part of Current assets. Enter previous-year figures in their own column. You determine the accounting and tax treatment before using these instructions.

Go to the steps and entry details

On this page

1. Where the expense goes in our form

These steps map your completed accounts. You or your adviser determine recognition, deductibility and any correction to earlier accounts.

Prepared write-off expense: Financial data → Profit & loss → Other charges
Include the expense once in the appropriate activity’s total.
Current closing asset balance: Balance sheet → Current assets
Include the debtor balance after the prepared write-off, together with the company’s other current assets.
Previous closing asset balance: Balance sheet → Current assets, prior-year column
Use the prepared comparative total. Entering a current write-off does not automatically change the comparative.

Micro-entity accounts report expenses under a short set of statutory headings rather than an itemised list. In SimpleCompanyTax, a bad-debt or trade-debtor impairment expense from your completed accounts is entered in Other charges, alongside overheads such as rent, insurance and professional fees. Enter it once, in the period whose accounts recognise it.

Keep the bookkeeping records behind the write-off. They are the evidence behind the figure you file.

2. Your Current Assets figures

Our balance sheet collects one Current Assets total for each period, which includes your Debtors balance alongside cash and stock. Include the current and previous period Debtors balances in those totals exactly as your completed accounts show them. If the previous period's accounts already showed the invoice as outstanding, keep it in the previous period's total rather than changing the historic figure in the filing form.

FRS 105 asks companies to assess their financial assets for impairment at each reporting date, and correcting a material error in earlier accounts has its own rules. Whether either applies to your debt is an accounting judgement that belongs with you or your adviser, not with the filing form.

3. The field not to use

Do not enter a customer-invoice write-off in Depreciation and amounts written off assets. That field covers fixed-asset depreciation, amortisation and impairment, such as equipment and vehicles, and the amount in it is added back when we calculate Corporation Tax. Putting a trade debt there would change your tax result.

4. When to involve an accountant

We can explain where the figures from your completed records go in our forms, but we do not provide accounting or tax advice. Speak to an accountant if:

you have not yet determined the accounting or tax treatment of the debt, for example whether and when to recognise an impairment;
the company is VAT registered, because separate VAT bad debt relief rules decide when you can reclaim VAT already accounted for on the unpaid invoice;
the debtor is connected to the company, for example a director or a related business, because additional tax rules can apply;
recovery is still being pursued and you are unsure the debt is bad at all.

5. Official guidance

For Corporation Tax, HMRC deals with company trade-debt impairments under the loan-relationship rules: CFM41030, trade debts and CFM33220, impairment losses. For VAT registered companies, HMRC publishes the conditions for reclaiming VAT on unpaid invoices: Relief from VAT on bad debts (VAT Notice 700/18). The accounts framework, including the impairment requirements for micro-entities, is FRC FRS 105. Companies House explains directors' responsibility for preparing and approving annual accounts: Life of a company: accounts.