Using a Debt Collector 1
Introduction
A debt collector should only be employed when your internal debt recovery measures have proved fruitless and you are not convinced legal action will recover sufficient or any payment. If a debt collector proves successful, without the debt collector making a personal visit to the customer, this is a good indication that your own debt recovery tactics need reviewing. There is nothing you cannot say that the debt collector can.
You can set up a ‘PO Box Number …’ under a collection name to give the impression of an outside body, with an independent telephone line at your offices.
However, if you really do not want to get too involved with true debtors, try a debt agency. Debt recovery companies are some of the biggest companies around. They use up to date technology to secure payment from debtors: for very little cost. In a ‘standard’ case the debt agency will charge about 5%. The cost, even in difficult cases, never usually exceeds 25%. The art of using a debt agency is not to use them too late. Give them a chance to collect while the debt is ‘young’ and success is probable.
Bad Debt Relief (Debt Recovery) A VAT registered company can claim back the VAT element of a bad debt: known as ‘bad debt relief’. The considerations are: a) that you have paid the VAT on an earlier VAT return b) your claim for VAT relief is at least six months after the latter of the invoice date, or the date payment was due i.e. 30 days after the invoice date, if you allowed a credit period. c) the debt has been written off d) there is no time limit for debts prior to 1 May 1997: after this date the time limit is three years and six months. Both periods are subject to b) above. e) a notice of a claim for bad debt relief has been sent to the debtor company advising them that you have written off the account and claimed back the VAT. The notice requires the debtor company to repay the VAT they claimed.
Detailed information can be obtained from the Customs & Excise web site at www.hmre.gov.uk: you should also consult your accountant to ensure you match the criteria and are following the correct procedure.
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