What is offsetting?
Definition of offsetting
Offsetting is the act of balancing money that you’re owed with money that you owe.
If HMRC explicitly says you’re allowed to, you might be able to offset taxes you owe them with tax rebates they owe you.
Another example of offsetting may occur when a contact is both a supplier and a customer. In this situation they may issue you with an invoice and you may issue them with an invoice. Rather than each of you fully paying the other’s invoice, it makes sense that only one party in this arrangement should make a payment for the difference of the two invoices.
Disclaimer: The content included in this glossary is based on our understanding of tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances, so should not be relied upon. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included in this glossary. If you don't have an accountant, take a look at our directory to find a FreeAgent Practice Partner based in your local area.
