Zakat on Accounts Receivable

Yes, there is Zakat on accounts receivable according to the majority of scholars. Money customers owe you for delivered goods or services is zakatable wealth because you possess the right to payment. If customers owe you £50,000 for invoices on 30-day payment terms, include £50,000 in zakatable business assets. Calculate 2.5% Zakat annually on outstanding receivable balances as part of business wealth.

Treatment of uncollectible bad debts has scholarly difference. Majority position includes all receivables in Zakat regardless of collectibility; if you later cannot collect, that is a loss reducing future wealth. Practical position allows excluding receivables you reasonably assess as uncollectible (customer bankrupt, in liquidation, confirmed default). Conservative approach: include all receivables; practical approach: exclude confirmed bad debts.

Aging receivables (invoices past payment due date) are still zakatable as accounts receivable. If invoice was due 30 days ago but customer has not paid, you still possess the receivable requiring Zakat. For Zakat on accounts receivable: include current receivables (not yet due), past due receivables (overdue but collectible), and aged receivables unless confirmed uncollectible.

Doubtful receivables (questionable collectibility but not confirmed uncollectible) have scholarly difference. Conservative position includes all doubtful receivables in Zakat; if collection fails, future wealth reduces naturally. Practical position allows excluding receivables with high probability of non-collection based on customer financial distress, payment history, or collection likelihood assessment.

The rate for Zakat on accounts receivable is 2.5% annually as part of business assets calculation. Include outstanding receivable balances in total business wealth (cash plus inventory plus receivables minus debts), calculate 2.5% on net business assets if above nisab for one year. Receivables are not taxed separately but included in comprehensive business Zakat.

Pay Zakat on receivables when invoice issued and goods/services delivered, not when payment received. Once you deliver products or complete services, you possess the receivable (right to payment) requiring Zakat even before customer pays. For Zakat on accounts receivable: calculate annually on outstanding balances on your Zakat date regardless of whether customers have paid yet.

Payment terms (net 30, net 60, net 90) do not affect Zakat obligation on receivables. Whether customer owes payment in 10 days or 90 days, the receivable is zakatable from invoice date. For Zakat on accounts receivable: include all outstanding invoices regardless of payment terms or due dates. Long payment terms do not exempt receivables from Zakat.

Accounting allowance for doubtful accounts (reserve for estimated bad debts) is not automatically deductible from Zakat. Conservative position calculates Zakat on gross receivables without allowance reduction. Practical position allows reducing receivables by specific identified uncollectible amounts (not general estimated reserves). For Zakat on accounts receivable: most calculate on gross receivables or exclude only confirmed bad debts.

Payment timing after Zakat calculation does not affect obligation. If you calculated Zakat including £10,000 receivable on your Zakat date, then customer pays £10,000 two months later, your Zakat calculation was correct. The receivable was possessed wealth on Zakat date requiring inclusion. Payment converts receivable to cash, both zakatable forms, so wealth continues requiring Zakat next year.

Written-off receivables (formally removed from books as uncollectible) can be excluded from Zakat calculation. Once you write off receivable after exhausting collection efforts, it is no longer possessed wealth. For Zakat on accounts receivable: exclude formally written-off bad debts from calculation. If you later recover written-off amount, include recovered cash in wealth when received.