Just have a question regarding a bad debt write off and the VAT account.
I have a bad debt less than 6 months I am using sage. I have credited the customers account with the gross amount and debited bad debts.
Would this affect the sales output on the VAT Return? I know it shouldnt affect the VAT as it is not older than 6 months. Just thinking if you have to make any adjustments sales on the form?
As you say you have debited the bad debt account with the gross amount, which is correct given the debt is less than 6 months, you cant reclaim bad debt relief until more then 6 months old.
When it is you will need to do a journal
Dr Purchases Tax Control Account £x
Cr Bad Debt Account £x
With the VAT element as a T1 journal so the bad debt relief is picked up on the next VAT return when you run the VAT return on SAGE.
So if I just write off the bad debt now it will be less than 6 months. Do I need to make any adjustments to box 6 for total value of sales excluding vat or is it just credit customer debit bad debts and that is all?
Regards.
-- Edited by Oasis83 on Thursday 7th of March 2013 08:33:05 AM
-- Edited by Oasis83 on Thursday 7th of March 2013 08:33:33 AM
I have spoken to my tutor as I am cuurently doing coursework for exams.
He said if you definately know that it is a bad debt and is to be written off, you can claim the vat back even if under 6 months. Would this be correct?
Not heard of this before. You should only write off a debt if you definitely know that it will never be paid, but I think you can only claim back the VAT if it is over 6 months old.
"When you can reclaim VAT on bad debts You can reclaim VAT that you paid to HMRC and which you have not received from the customer. The conditions are that:
the debt is more than six months old and less than four years and six months old you have written off the debt in your VAT accounts and transferred it to a separate bad debt account the debt has not been sold or handed to a factoring company you did not charge more than the normal selling price for the items"
