I have a client that has 3 quite larger bad debts(they do not want to take the companies to court)They want me to write them off and claim the vat back. Any help on how the best way to do this would be appriciated.
This is how to do it in Sage Line 50, I would think Sage Instant will be the same :
Remove the bad debt from the sales ledger by doing a credit note to the bad debt nominal code (8100) for the total amount with a T9 tax code. Then do a journal to credit bad debt nominal (8100) with the amount of the VAT with a T9 code and debit Purchase tax control (2201) with a T1 tax code. That way it will pick it up in the VAT Return.
If the debts are valid debts and the balances are large why is you client not wanting to take their customers to court? Surely it would make sense to take to court and get the monies outstanding and get the full amount paid rather than writing off at first instance. I assume your client isnt longer dealing with these customers?
I would always advise a client to pursue debts vigorously unless they are small and the cost of pursuing isnt worth the debt involved or the chances of recovering the debt are slim eg customer in administration or liquidation.
Remember that the debt needs to be over 6 months old before you can claim VAT relief and your client has to inform their customer that they are claiming bad debt relief on the debt outstanding.
