Writing-off and treatment of VAT

truecockney

I know there are rules concerning the writing off of debts you are unlikely to recoup (typically you can reclaim the VAT element of invoices over 6 months overdue but less than 3.5 years), but does anyone know whether there are similar rules that apply when writing off credits (whether that be overpayments or credit notes)? This is on both active and inactive clients.

I can't see anything on the HMRC website, nor their associated business websites!

Monsoon

Trying to get my head round this one...

Overpayments are not VATable - there was no supply. You just write off the gross value.

Credit notes: The VAT will already have been accounted for on these. If the credit note leaves a balance on the customer/supplier's account that is never used up or refunded, then the balance again should get written off gross.

I think that's right. I have a very fuzzy head today but it makes sense to me!

truecockney

Thanks Monsoon. I was pretty certain there was no reverse of Bad Debt Relief on credits but just coming back from holiday (fuzzy head syndrome too!), had to check with no information to go with.