VAT & Bad Debt Relief: Am I £12,000 in Pocket?!
I raised an accounts receivable invoice on the 31 May 2012 for £75,000 + £15,000 VAT (£90,000).
I was paid £15,000 immediately, which simply covered the VAT element (paid to HMRC). £75,000 remains in accounts receivable on our balance sheet.
I now feel it's unlikely that the full £75,000 will be paid before 30 Nov 2012 (which is 6 months from the date the invoice was raised), as I've not received a further penny, despite promises of £500 a week or so ago!..
However, I am not incurring any costs until partial payments are made to clear-down the £75,000. E.g. Assuming tomorrow I was paid £1,000, I'd go ahead and purchase materials to supply £1,000 worth of services. The original invoice I raised clearly states "prepaid [XYZ]".
So therefore I feel writing off £75,000 as a bad debt and reclaiming [VAT] bad debt relief of £12,000 (20% of the £75,000) would be incorrect because I have not incurred any costs.
Surely if I did this, I'd be £12,000 in pocket, yet the P&L would be of no net gain/loss because of this invoice, because I understand when reclaiming [VAT] bad debt relief, the amount written off must be transferred to a separate 'bad debt' account. The only thing I would need to do is reverse the cost of sales accrual I did in May when the sale was raised.
Also, do I need to make the customer aware when I am writing the invoice off? E.g. Could I write it off now if I wished? I understand I'd need to wait until 30 Nov 2012 to reclaim [VAT] bad debt relief. We have no Ts & Cs regarding when an invoice can or cannot be written off.
I simply want him to pay the remainder, or I'll write it off now.
Thanks in advance.
P.S. We are on the accrual VAT scheme.
- VAT on exports to EU 74 1
- 5th April 213 7
- Company buy back of shares from directors 170 9
- Please tell me what to do!! 262 6
- NIC thresholds - two employments 1,974 33
- Cash basis 128 5
- Cash basis 779 28
- Finding a Company UTR for a newly formed company 265 2
- Investor exit 241 4
- client threatening legal action 2,290 31
- When & How much of Income to recognise 129 2
- What are the options for writing off a Directors Credit balance 225 3
- 1 investor and 1 director 50% shareholding each advice please 340 14
- Undeclared rental income 2,576 23
- Desperate IFAs and Auto-enrolment Scare stories 556 23
- Partnership registered in error. No activities with view to profit. 331 9
- Rental income 149 2
- s455 Directors loan 207 3
- Insurance for Company Ltd. by Guarantee 75 1
- Incorrect penalty warning letters sent 1,187 8
- Skandia using wrong address 608
- FHL, period of grace and Entrepreneur's relief 327
- Employee rewards 307
- Gift of reversion and lease into trust by two different people - later PPR 273
- EPS Analysis - Change to EURO 237
- Etax Australian 200
- LLP in Construction Industry 165
- Selling On Amazon & Calculatign Prices/Vat 153
- Interest and late payment charges HMRC 140
- Re-submitting CT600 on paper 136