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Credit Note query for VAT rate change

PAMDILLPAMDILL Experienced MentorRegistered Posts: 716
I am not an MIP only a student but I have this problem at work just now, hoping one of you qualified members can help.

I have a VAT invoice issued to a customer under the 17.5% rate which is now to be credited in full and their account should now be £0.

Now as the VAT rate is currently 15% and the balance outstanding is £2,350 inc. VAT do I do a credit note for £2,000 & 15% VAT and a bad debt write off for the balance or do a credit note for £2350 inc. VAT, net £2043.48 which will then leave me with a slightly incorrect sales figure?

Comments

  • BluewednesdayBluewednesday Font Of All Knowledge Registered Posts: 1,624
    For a credit note you put the VAT on at the rate that it was charged originally. Therefore your credit note will have VAT on at 17.5% which will clear their account and put things back as they were.
  • PAMDILLPAMDILL Experienced Mentor Registered Posts: 716
    For a credit note you put the VAT on at the rate that it was charged originally. Therefore your credit note will have VAT on at 17.5% which will clear their account and put things back as they were.
    That is what I thought but when reading the HMRC website notice for credit notes issued when VAT Rates change it looked like I could only do that if the credit note was issued within 14 days of rate change.
  • sarahwilsonsarahwilson Experienced Mentor Registered Posts: 567
    Blue Wednesdays right, I tried to work it out off HMRC and it was utterly bamboozling!!
  • GianniGianni Feels At Home Registered Posts: 99
    It does state on the HMRC web site all credit notes at the old rate should be issued by January 14th 2009. But in all honesty this was hardly practical and I believe HMRC did state they'd be relaxed in their attitude towards this.

    I'd issue the credit note at 17.5% to cancel the original invoice (as I have done a few times after the rate change deadline date). If you were inspected and pulled up on this, yes it's a slight deviation but you can clearly explain why and therefore it won't be an issue.
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    I agree with the posts saying credit it at 17.5% as that was the rate in force at the time of the invoice to which the credit note relates.
  • ToffeemadblueToffeemadblue Well-Known Registered Posts: 102
    Absolutely we have done loads of credit notes at the old rate
  • A-VicA-Vic Expertise Guaranteed Registered Posts: 6,970
    Ive also come accross this a lot but have also used the 17.5 %
  • PAMDILLPAMDILL Experienced Mentor Registered Posts: 716
    Thanks, I have done that, I was just worried as being a construction company VAT Inspectors seem to be really really strict when they visit.
  • A-VicA-Vic Expertise Guaranteed Registered Posts: 6,970
    Credit Notes arnt a problem for me its the actul invoices themselves using 17.5% and not small compaines either but some as late as january charging 17.5% one or two have issued correct invoices with the new vat charge but a large majority havnt.
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