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Supplier invoice on system - never paid

Supplier invoice on system - never paid

Supplier invoice on my system - we have not paid it and now the invoice is in dispute. I have now heard that the supplier is in administration & therefore the 'issue' will unlikely be resolved.

As it is coming upto my FYE - can i post a Internal credit ( T9 no VAT) and remove the invoice from the purchase ledger.

Can anyone offer any other suggestion??

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13th Nov 2010 17:05

Supplier Invoice

I'm guessing from your post that you are using Sage?

If so, as you say, post a credit note for the gross amount with a T9 tax code (this assumes that you are not on the VAT Cash Accounting scheme) to the Bad Debt nominal code (8200 is the standard nominal code list).

Then, go to Bank -> Supplier, select the supplier and pay both the invoice and the credit note so they are allocated to one another.

John 

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14th Nov 2010 11:04

@johndon68

Are you advising the OP to keep the input VAT on a purchase invoice that hasn't been paid and won't be?

If so, that doesn't sound right to me.

-- Kind regards Andy

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14th Nov 2010 11:21

VAT

My understanding was that 6 months had to pass with regards to write offs and VAT - happy to be corrected though in which case the credit note should be entered with exactly the same VAT as the original invoice.

John 

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14th Nov 2010 11:51

@ John

Neither of us know how long the invoice has sat on the system, but my point is that if you remove it from the aged creditors list, and if you match the credit note with the invoice through the bank, it will become invisible and lost for good. Not best practice is it, unless you want to conveniently forget to pay back the VAT.

Remember, we are dealing with a purchase invoice, not a sales invoice and as I understand it if it is unpaid for 6 months you have to reverse the input VAT you have recovered in the meantime until you actually make payment of that invoice. 

-- Kind regards Andy

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14th Nov 2010 11:59

Write Off

In which case, Sage (assuming, based on the mention of the T9 tax code originally that Sage is being used here) themselves are wrong as the automated write off option in Sage 50, if used, does exactly what I suggested in my original post including allocating the invoice and credit note so neither show on the Aged Debtors...

John 

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14th Nov 2010 12:21

Forget Sage, what do you think?

I'll add that to my list of reasons why I resigned my accountants club membership ;)

-- Kind regards Andy

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14th Nov 2010 20:12

Matching VAT codes

Sage should only allow matching when the VAT codes are the same (e.g. a T1 invoice can only be cancelled by a T1 credit) I haven't got a copy of Sage handy right at the moment to double check that but I remember this coming up in trying to tidy up a client's woefully inaccurate purchase ledger.

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14th Nov 2010 20:25

Matching VAT Codes

Matching of VAT codes only applies if VAT Cash Accounting is being used.  On standard VAT, the codes can be different.

John 

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By robguy
16th Nov 2010 09:39

Thanks all, but still unsure abt the VAT?

 Certainly safer form my perspective ref any future VAT inspection to post a credit with VAT. But this still seems to me that the VATman gains as the supplier may well of paid their output VAT ( it is abt 5 months old) while i'm not claiming my input VAT! 

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By blok
16th Nov 2010 10:31

.

What I have learned is that - Its not a team game when it comes to vat.  You just need to look after yourself.

You need to be giving back the vat already claimed.

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16th Nov 2010 11:25

@Robguy

'Safer'?

It's not a question of being safe, but simply being honest. Anything else is a VAT fraud.

-- Kind regards Andy

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19th Nov 2010 11:29

Suppliers invoice reversal

Talking suppliers invoice and I read a reference to Trade Debtors. Tut, tut get it right.

If supplier was captured under a T1 code you will commit VAT fraud if you reverse it with a T9 entry.

 

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19th Nov 2010 13:41

W/off Purchase invoice

The answer is straight forward. If the invoice is not going to be paid then reverse the invoice (Including the VAT) by whatever means, end of storey.

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By pawncob
19th Nov 2010 17:00

Bogged down

Why is everyone bogged down in the technicalities of how to do it?

Until the company administration has been dealt with, it's a live invoice. You can't write it off.

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21st Nov 2010 12:06

...and now it is in dispute...??

The OP seems to indicate they had happily posted it onto their purchase ledger and then later disputed it.

I am sure you are an honourable businessperson and this is not the case but the way your message is written implies that you might just be seeking to take advantage of a supplier who has gone into administration.

If you are disputing it then surely you have asked for a credit note from the supplier - they are in administration you say - so they must still be trading and are capable of responding to you request for a credit.

If you are not seeking a credit note from them why do you think it is acceptable to just write it off? Are you really saying that nothing is payable.

If they refuse to issue a credit, the administrators might take action against you to recover the debt owed to you - in these circumstances it would be inappropriate to write it off.

From a VAT perspective, if you are saying you never received the supply on the invoice then no VAT should be chargeable and you would need to write back the input VAT you reclaimed previously (there should be a credit note showing this VAT write back if the supplier agrees with you but if not you should certainly make sure you 'pay back' the VAT reclaimed on the invoice as part of any write off that you deem appropriate).

Malcolm Greenbaum

Director - Greenbaum Training & Consultancy Limited

 

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