How to manually write off customer invoices to bad debt

Summary

How to manually write-off customer invoices to bad debt in Sage 50 Accounts.

Description

NOTE: This article applies to the Standard VAT scheme. See our alternative article to write off customer invoices to bad debt on the VAT Cash Accounting scheme.

If customers are unable to pay their invoices due to liquidation, insolvency or dispute you can write these off. You record a bad debt write-off in Sage 50 Accounts.

Use the Write Off, Refunds and Returns wizard for base currency write-offs. Follow the steps in this article for foreign transactions or manual write-offs.

TIP: The non-vatable tax code, T9, excludes transactions from the VAT Return. To check your non-vatable tax code go to Settings then Company Preferences, select VAT, then select Parameters.

Resolution

Follow these steps to write off customer invoices to bad debt manually.

Bad Debt Relief conditions

HMRC states that you can claim back VAT under certain circumstances, such as:

You accounted for the VAT on the supplies and paid it to HMRC
You wrote off the debt in your VAT accounts and transferred it to a bad debt account
The debt remained unpaid for six months after the payment due date or the supply date, whichever is later

For more details on other conditions, contact HMRC or visit their website at http://www.hmrc.gov.uk

Create a Bad Debt Write Off nominal code

When using Sage's default nominal structure, you'll have a Bad Debt Write Off nominal code 8100. If you've deleted this account, or created a different nominal structure, create one before proceeding.

Go to Nominal codes then select New/edit.

Complete the Nominal Record as required, for example:

N/C	Enter the nominal code number to use for bad debt write-off. NOTE: This code is to be within the overheads section of the profit and loss. The range is 8100 - 8199 in the default chart of accounts.
Name	Enter the name of the account, for example, Bad Debt Write Off.

N/C

Enter the nominal code number to use for bad debt write-off.

NOTE: This code is to be within the overheads section of the profit and loss. The range is 8100 - 8199 in the default chart of accounts.

Name

Enter the name of the account, for example, Bad Debt Write Off.

Select Save then Close.

Write off a sales invoice

In the following example, the customer invoice is 120.00, including VAT at 20%. The debt is unpaid, and you can write it off.

Go to Customers then select Batch credit.
Enter the details on the Batch Customer Credits window, for example:

A/C Date Credit No N/C Details Net T/C VAT

BROWN Write-Off Date BADDBT 8100 Write-Off 100.00 T1 20.00
Select Save then Close.

A/C	Date	Credit No	N/C	Details	Net	T/C	VAT
BROWN	Write-Off Date	BADDBT	8100	Write-Off	100.00	T1	20.00

TIP: Adjust an invoice posted against a project by posting a project only charge for the net amount.

Once the write-off is complete, you can allocate the credit to the invoice to clear the outstanding debt.

You've now posted the credit to reclaim the VAT, updating box 1 of the VAT return for the period as required by HMRC.

The credit date must be after the six-month period to satisfy HMRC rules, as explained in the Bad Debt Relief Conditions section.

Solution Properties

Solution ID: 200427112156531
Last Modified Date: Mon Nov 24 14:17:34 UTC 2025
Attributes: Product Details
Modules: Customers
Modules: Suppliers
Modules: Contact Management
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