I have just been completing a paper mock exam (ICB level 2 manual ) prior to having a go on the dreaded online version and have come across a question regarding bad debt relief.
I know that I account for the Vat being reclaimed by adding it to the input tax in Box 4 However I was unsure as to whether to add the net amount of the debt to Box 7.
I decided not to, as it is not a purchase, but when looking at ICB suggested answer lo & behold they had added it.
I have been looking at both HMRC & ICB study corner websites and can find no mention on either as to the correct treatment of this on the form
The bad debt is an expense to the company and as such will be shown on the P&L. It is also a vatable item, and as such will show in Box 7 being treated the same an any other vatable expense such as purchases, tel costs etc etc.
Many people go wrong on this one by just deducting it from sales as if it was a credit note.
I remember doing that manual exam, just before I did the online version.
