Bad Debt - VAT problem
Bad Debt - VAT problem
Author
Discussion

d1bble

Original Poster:

3,395 posts

286 months

Wednesday 5th July 2006
quotequote all
Okey dokey, quick question. (Almost definitely for Eric)

I invoiced a company back in May and they have no intention on paying (its complicated). I do, however, have to complete a vat return for period ending July 06 and I have a choice, either issue a credit note/error in invoicing or pay the vat and claim it back in six months as a bad debt. I don’t mind paying the vat as I really, really don’t want to give them the satisfaction of getting off likely.

Anyone had any experience 

PetrolTed

34,464 posts

326 months

Wednesday 5th July 2006
quotequote all
Create a credit note but don't send it to them?

d1bble

Original Poster:

3,395 posts

286 months

Wednesday 5th July 2006
quotequote all
PetrolTed said:
Create a credit note but don't send it to them?


yep, could always say that i'd sent it.

Eric Mc

124,788 posts

288 months

Wednesday 5th July 2006
quotequote all
That constitutes fraud and would be extremely annoying to Mr VAT man - especially when there is no need for it.

When was the invoice isued and when did it become "bad"?

You have to wait six months (two VAT periods) from the date of the "writing off" of the debt before you can reclaim the VAT on said invoice.

Once that time period has expired, you can make your claim without any need for tricks.

Don't forget, the VAT bad debt claim is not made by reducing the Output VAT on Sales but by increasing the Input VAT on your costs.

d1bble

Original Poster:

3,395 posts

286 months

Wednesday 5th July 2006
quotequote all
Eric Mc said:
That constitutes fraud and would be extremely annoying to Mr VAT man - especially when there is no need for it.

When was the invoice isued and when did it become "bad"?

You have to wait six months (two VAT periods) from the date of the "writing off" of the debt before you can reclaim the VAT on said invoice.

Once that time period has expired, you can make your claim without any need for tricks.

Don't forget, the VAT bad debt claim is not made by reducing the Output VAT on Sales but by increasing the Input VAT on your costs.


Thanks Eric. Invoiced issued in May and came 'bad' in June.

Eric Mc

124,788 posts

288 months

Wednesday 5th July 2006
quotequote all
And what are your VAT quarters?

havoc

32,639 posts

258 months

Wednesday 5th July 2006
quotequote all
Eric Mc said:
And what are your VAT quarters?

From the OP sounds like July, Oct, Jan, Apr

d1bble

Original Poster:

3,395 posts

286 months

Wednesday 5th July 2006
quotequote all
havoc said:
Eric Mc said:
And what are your VAT quarters?

From the OP sounds like July, Oct, Jan, Apr

d1bble

Original Poster:

3,395 posts

286 months

Wednesday 5th July 2006
quotequote all
i think i'll just pay the vat (2k) (still chase the bad debt) and then claim back in two vat quarters.

Eric Mc

124,788 posts

288 months

Wednesday 5th July 2006
quotequote all
Correct.

You aren't on the VAT Cash Accounting scheme, I presume?

Edited by Eric Mc on Wednesday 5th July 16:05

d1bble

Original Poster:

3,395 posts

286 months

Wednesday 5th July 2006
quotequote all
no, my accountant says theres too much faffing.

I can see your point though Eric.

Eric Mc

124,788 posts

288 months

Wednesday 5th July 2006
quotequote all
He's not wrong - but it's your business, not his.

I hate cash accounting but it is sometimes a valid option.

sleepezy

2,063 posts

257 months

Wednesday 5th July 2006
quotequote all
unless the business has gone into formal insolvency proceedings, in which case you can accelerate the VAT relief... how long is the story?

d1bble

Original Poster:

3,395 posts

286 months

Thursday 6th July 2006
quotequote all
sleepezy said:
unless the business has gone into formal insolvency proceedings, in which case you can accelerate the VAT relief... how long is the story?


It’s long and a bit shaky.
Probably best to keep it under me hat for now
as you never know who's watching...