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I would be inclined to make a bad debt provision in the books (Dr Bad debts & Cr Bad Debt Provision) until the debt reaches 6 months old.
Once the debt has passed 6 months old, assuming that this is for an existing customer invoice, you raise a credit note on the customer account to the bad debt provision code remembering to include VAT.
It’s important to Note: That whilst this takes care of the book keeping entries this will show incorrectly on the VAT Return.
Posting a credit note this way will reduce your sales turnover & sales vat (box 1&6 on your VAT return). However, when reclaiming the VAT on a bad debt you should increase your input tax (box 4 on the VAT return) and not touch your output tax.
You will therefore need to remember to make the appropriate adjustments before filing your VAT return for this period.
Does anybody else have an easier way than this (I am sure it must exist!)
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