If I issue an invoice and the customer nevers pays and I want to write it off, how do I account for this. Do I just delete the invoice with a note saying why it was cancelled or ... ? Obviously I shouldn't be paying tax on an invoice I never received money for ?
You will fould up your vat records if it's in a vat quarter you have already closed.
Far safer to simply raise a credit note.
(this is more news:uk.business.accountancy btw)
Thanks for reply, will post there for further questions.
That would mean it never has to be paid. Write it off to the bad debts account and claim Bad Debt relief from C&E, if appropriate.
If you post a credit note then that would surely credit your vat account anyway.
But the treatment of a Credit Note is not the same as Bad Debt Relief for VAT - e.g. 6 month period etc. Also, C&E would not be amused by this manoeuvre. :)
I'm trying to figure out how C&E would actually loose out, as VAT is a tax on sales, and by raising a credit not you are reducing your sales.
I guess they would loose out if the debtor were also VAT registered and claimed back the vat on the invoice.
Why does a Credit Note not reduce sales? If it does not, why is the Vat due reduced?
Which he/she is entitled to do, unless Cash Accounting is being used.
...but must repay it a) on invoices before 1/1/03 when you sent them the appropriate notification to comply with the bad debt relief rules or b) on invoice issued on or after 1/1/03 if they have not paid within six months
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