Can unpaid VAT invoices be written off in full?

Is there a legitimate treatment or not?

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I attended a job interview and was rejected because I didn't answer this question to their satisfaction.

The group of companies were all stand alone and all had separate VAT registrations. There were many inter company charges all made by VAT invoices and the input/output taxes processed in each company's VAT return. The kicker was the invoices were never paid but they wanted to write them off in full without any adjustments to the VAT returns.

I've only ever used the standard treatments (pay the invoice etc) but am I wrong in asssuming there's no legitimate way to write this off?

Thanks

Replies (6)

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By WhichTyler
20th Feb 2019 11:13

Cash accounting for VAT or traditional?

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By rememberscarborough
20th Feb 2019 12:25

Traditional

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chips_at_mattersey
By Les Howard
20th Feb 2019 12:33

If outstanding balances were written off between the companies, then payment has been made, and no BDR is required.
(A bit harsh not to be offered a job on the basis of such a question!)

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Replying to leshoward:
Psycho
By Wilson Philips
20th Feb 2019 16:23

That is not in accordance with my understanding, Les. If the debt is written off (ie without any payment) then I had thought that bad debt relief was available automatically after 6 months, with the debtor having to make a corresponding adjustment to their return?

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Replying to Wilson Philips:
chips_at_mattersey
By Les Howard
21st Feb 2019 16:34

Which is precisely why it should not be a make or break question in interview.
My logic is that the inter-company write-off is actually consideration for the supply.

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Replying to leshoward:
Psycho
By Wilson Philips
21st Feb 2019 16:49

I don't follow that logic at all. If someone owes me £x and I decide to write off that debt there's no way that I would entertain the thought of having received any form of consideration.

Since a pre-requisite of bad debt relief is that the debt must be written off in the books of account, if said write-off constitutes consideration there could never be any bad debt relief per your logic!

Looking at HMRC's manual, there is no suggestion there that a write-off could be treated as payment.

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