VAT credit note - how to treat?

Cordie
Cordie Registered Posts: 12 Regular contributor ⭐ ? ⭐
Hi

We have received some VAT credit notes from BT, how do I treat them? The bills were paid and so there is a nil balance on the account now but the credit notes specifically say they cannot be used against future bills.

What are VAT credit notes and how should I treat them?

Comments

  • Poodle
    Poodle Registered Posts: 711
    Hi Cordie

    I have had this with BT as well. I think that it only happens when you are VAT registered and pay your BT account on a monthly budget plan.

    I once queried this with them and the answer that came back was "well you cannot claim the VAT on the part that you have not paid" and that response fails in both cases for cash accounting and acruals VAT.

    Cash accounting you can claim a prorata amount of VAT and accruals you can claim it all at the tax point, providing you pay the bill within 6 months.

    If your BT bill is £150 and you pay £50 in the first month they send a credit note for £100 - I do nothing with this but file with the main bill.

    I may be wrong and I am sure that you may receive an alternative approach.

    Poodle
  • Cordie
    Cordie Registered Posts: 12 Regular contributor ⭐ ? ⭐
    Thanks Poodle, we aren't on a budget plan but the service we had was so poor that when we complained these VAT credit notes were sent in relation to 3 bills, but these bills have been paid, a while ago. I am just wondering whether the credit notes were issued by a different department to the one dealing with payments, as no refund appears to be coming our way, I wondered whether as they said VAT credit note it was something special that required special action!
  • sheelagh
    sheelagh Registered Posts: 133 ? ? ?
    VAT Credit notes

    Hi Cordie

    If your client paid the invoices in full and BT acknowledge that the amount paid is too much, then the client is owed a refund.
    With any "normal" supplier this refund could be paid by cheque (or bank transfer) or by deducting the amount due from another (any other)bill.
    I guess BTs accounting system is too inflexible to cope with the process of allocating the credit against any invoice other than the one it speficially relates to.
    You could try deducting it from a future invoice on the same BT account, but this might trigger the process of collecting an unpaid invoice (the future invoice being only part paid) - who knows where that could lead.
    I would be inclined to request a refund by cheque.
    As for posting the transaction, two options
    1) post the credit note in the normal way, and (if your software has this facility) post a credit note refund when the cheque arrives.
    2) post a bank receipt to the telephone nominal code.
    Which ever option you choose, the final outcome should be DR Bank, CR telephone and CR VAT.
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