Solution Properties
Solution ID:
200427112223635
Last Modified Date:
Wed Feb 28 14:07:46 UTC 2024
Taxonomy Path:
Case category//How do I...//processing
Author:
[email protected]
How do I use the Write off, Refunds and Returns wizard?
Description

You can use the Write Off, Refunds and Returns wizard to process write off and refund procedures for easily customers and suppliers. This guide runs through the options of this wizard, as well as bad debt relief.

Let's take a look.

 TIP: Only one user at a time can access the wizard. Other users will need to be logged out while you're using it. 

Cause
Resolution

 NOTE: If you're writing off a foreign transaction, or if you want to process the write off manually, please refer to our other helpful guide. 

Using the wizard

  1. On the navigation bar click Customers or Suppliers then click Write offs & returns.
  2. Select the required option then click Next.

     NOTE: For further information about the areas available, please refer to the relevant sections later in this article.

  3. Follow the on-screen prompts using the buttons to navigate.
    When you've selected all of the required options, a summary of the information you've selected appears.
  4. Ensure the information is correct then to post the write off, refund or return click Post.
    If required, to modify any of the choices made, click Back, or to cancel the wizard, click Cancel.

 NOTE: If you need to delete transactions created via the Write Off, Refunds and Returns Wizard, you should first edit the transaction, delete the reference and save the changes. You can then delete the transaction. When editing or deleting transactions the Customer Record Month To date (MTD) and Year To Date (YTD) may be affected.

Options in the wizard

Customer or Supplier Invoice Refunds

Use this option when you have an invoice that has been paid and, for whatever reason, a credit is to be raised and the cheque returned. For example, if goods have been returned and a full refund given.

Customer or Supplier Cheque Returns

Use this option for cheques that are returned from your bank marked Refer to Drawer or cheques that have bounced.

Refund Credit Notes 

Use this option when there is an outstanding credit on the account, and rather than allocating this to a future invoice the customer is to be refunded or your money is to be returned to you.

Payment on Account Refund

Use this option when you have paid or received a cheque that is still outstanding on the customer's or supplier's account and is to be returned to the customer or from the supplier.

Write off Customer or Supplier Accounts

NOTE:  VAT is not accounted for when using the write off wizard, therefore all of the automatic transactions are posted with the non-vatable tax code, T9 by default.

Use this option when an entire account is to be written off. For example, the company has ceased trading and there will be no further activity on the account.
This option cannot be used to write off accounts using a foreign currency.


Write off Customer or Supplier Transactions

Use this option to write off outstanding invoice transactions, either individually or in batches. For example, when you are sure that a customer will not pay one or more invoices, or you will not pay your supplier for one or more invoices, perhaps where a dispute has arisen.

NOTE:  VAT is not accounted for when using the write off wizard, therefore all of the automatic transactions are posted with the non-vatable tax code, T9 by default.


NOTE: This option cannot be used to write off foreign currency transactions.

Write off Transactions below a value

Use this option to write off invoice amounts up to a specified amount. Enter the value and all outstanding invoices below that value are listed for you to select from.

NOTE:  VAT is not accounted for when using the write off wizard, therefore all of the automatic transactions are posted with the non-vatable tax code, T9 by default.


NOTE: This option cannot be used to write off foreign currency transactions.


Write off Small Overpayments

Use this option to write off overpayments resulting from receipts that are more than the value of the original invoice, or have been entered as payments on account. The maximum value you can specify is £/€99.99.

NOTE:  VAT is not accounted for when using the write off wizard, therefore all of the automatic transactions are posted with the non-vatable tax code, T9 by default.


NOTE: This option cannot be used to write off foreign currency transactions.


Bad Debt Relief Conditions

Bad Debt Relief Conditions for customers

HMRC state that you are only eligible to claim back VAT under certain circumstances.

 EXAMPLE:

  • You have already accounted for the VAT on the supplies, and paid it to HMRC
  • You have written off the debt in your day to day VAT accounts and transferred it to a separate Bad Debt account
  • The debt has remained unpaid for a period of six months after the time payment is due and payable or, if later, six months after the date of the supply

     NOTE: There are other conditions you must satisfy. For a more detailed description contact HMRC, or, visit their website at http://www.hmrc.gov.uk

When writing off sales credits, these rules do not apply. The VAT becomes repayable at the point of write off.

Bad Debt Relief Conditions for suppliers

Before you can write off your purchase invoice to bad debt, you must decide whether or not you need to repay the Input tax claimed when the original purchase invoice was VAT Reconciled. There are different rules depending on when the supply was made to you.

For further information about this, please refer to VAT Notice 700/18, available from HMRC or visit their website at http://www.hmrc.gov.uk

Reclaim or repay VAT after a write off

After writing off customer or supplier transactions or accounts, using the Write Off, Refunds and Returns wizard, you may need to reclaim or repay the VAT element of the transaction.

Repay VAT after writing off a supplier account with a positive balance

To repay the VAT after writing off a positive balance using a non-vatable, T9, tax code, to move the VAT amount from the bad debt write off nominal code to the purchase tax control account and record the repayment in box 4 on the VAT Return, you need to post the following transactions:

  • A VAT only purchase credit to correct the VAT Return
  • A purchase invoice to correct the balance on the supplier account and the Bad Debt Write Off account
Repay VAT after writing off a customer account with a negative balance

EXAMPLE: You have written off a sales credit for Brown Ltd. The original credit was for £/€120.00 including VAT at 20% and was posted using the T1 tax code. Brown Ltd has gone out of business and the credit has been written off in the accounts using the Write Off, Refunds and Returns wizard. This process illustrates how to post a journal to include this on your next VAT Return.

Reclaim VAT after writing off a positive balance on a customer account or a negative balance on a supplier account 

When you write off a transaction or account using the Write Off, Refunds and Returns wizard you may need to reclaim or repay the VAT element of the transaction. In the following example, an account with a balance of £/€120.00, inc VAT at 20%, was written off on June 30th. The write off qualifies for bad debt relief as of the December 31st.

NOTE: If you use the UK VAT Cash Accounting scheme, you only make payments to HMRC for VAT that's already been paid to you. In this situation you haven't received payment and accounted for VAT, therefore there's nothing to reclaim.

Reverse a write off transaction

There may be instances where you choose to write off a transaction or an account and you need to reverse this write off.

  1. Click Transactions and locate and select the write off transaction then click Edit.
  2. Delete BADDBT in the Reference box then click Save and click Yes.
  3. Ensure the write off transaction is still selected then click Delete, click Delete again and click Yes. 



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