Reclaiming VAT on bad debts
Discussion
The VAT being recoverable on the Bad Debt(s) is ADDED to the Input VAT claim (not deducted from the Output VAT Declaration). Also, the value of the VAT Exclusive Bad Debts is added to the total Input values, not deducted from the Output values.
The bad debt needs to be written off in the overall accounts as well for the VAT Bad Debt Relief claim to be valid.
If at any time in the future, the bad debt is recovered in full or in part, VAT needs to be declared on the recovered amount.
The bad debt needs to be written off in the overall accounts as well for the VAT Bad Debt Relief claim to be valid.
If at any time in the future, the bad debt is recovered in full or in part, VAT needs to be declared on the recovered amount.
Edited by Eric Mc on Friday 4th May 11:51
tinman0 said:
Just putting together our vat return for one of the companies, and this quarter we credited out lots of bad debt.
Question is - how do I put that on the VAT return?
Or shall I just bung in a covering letter?
Question is - how do I put that on the VAT return?
Or shall I just bung in a covering letter?
Maybe instruct a debt recovery company with TEETH? Check my profile (don't want another snooty post about advertising) and if we can help feel free to contact us.
Andy - for a number of years, there definitely was a requirement to notify the debtor that you had written off the money they owed you as "bad". I am pretty sure that this has now been quietly dropped.
If anyone tries to write off a debt by using a Credit Note, it would be absolutely ESSENTIAL that the credit note be forwarded to the delinquent customer for the credit note to have any validity at all.
If anyone tries to write off a debt by using a Credit Note, it would be absolutely ESSENTIAL that the credit note be forwarded to the delinquent customer for the credit note to have any validity at all.
jamesuk28 said:
tinman0 said:
Just putting together our vat return for one of the companies, and this quarter we credited out lots of bad debt.
Question is - how do I put that on the VAT return?
Or shall I just bung in a covering letter?
Question is - how do I put that on the VAT return?
Or shall I just bung in a covering letter?
Maybe instruct a debt recovery company with TEETH? Check my profile (don't want another snooty post about advertising) and if we can help feel free to contact us.
its for services in advance. they don't pay, we don't play.
problem is that this is a company we took over and they had different ways of working than my company. in my company, we raise the invoice once we've been paid (eg online), that way we have the cash and its accounted for properly, and you don't get this stupid position of having to reclaim vat money from debts that are older than 6 months etc.
How does your customer know what to pay?
In its simplest expression, an invoice is a formal notification to you customer of the amount they need to pay you in settlement of amounts due for goods or services rendered.
If your customer is "notified" by some other form of communication other than a formal invoice, is not the first notification an invoice anyway?
In actual fact, the VAT authorities here in the UK are quite relaxed about this type of practice and are prepared to accept that a "pro-forma" invoice is not an actual VAT invoice. In other words, issuing the note to the customer telling them how much to pay does not always constitute the raising of a VAT invoice.
Obviously, if a business is in the habit of issuing pro-forma invoices instead of "normal" invoices, how do they post and monitor their debtors transactions in their book-keeping and accounting system?
And where does a pro-forma invoice stand from a legal point of view compared to a "proper" invoice?
In its simplest expression, an invoice is a formal notification to you customer of the amount they need to pay you in settlement of amounts due for goods or services rendered.
If your customer is "notified" by some other form of communication other than a formal invoice, is not the first notification an invoice anyway?
In actual fact, the VAT authorities here in the UK are quite relaxed about this type of practice and are prepared to accept that a "pro-forma" invoice is not an actual VAT invoice. In other words, issuing the note to the customer telling them how much to pay does not always constitute the raising of a VAT invoice.
Obviously, if a business is in the habit of issuing pro-forma invoices instead of "normal" invoices, how do they post and monitor their debtors transactions in their book-keeping and accounting system?
And where does a pro-forma invoice stand from a legal point of view compared to a "proper" invoice?
Technically, you are being paid in advance of the "official" invoice and therefore the VAT "tax point date" is the date the money is received.
You are, essentially, cash accounting for VAT. This should be OK provided your turnover is within the "Cash Accounting" thresholds (which are, these days, quite generous).
Legally, however, the initial communication letting someone know what they have to pay to obtain something from you could be looked on as an invoice in itself.
You are, essentially, cash accounting for VAT. This should be OK provided your turnover is within the "Cash Accounting" thresholds (which are, these days, quite generous).
Legally, however, the initial communication letting someone know what they have to pay to obtain something from you could be looked on as an invoice in itself.
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