Customer CREDIT write off

[Nicky03]

Hi, I have a customer credit on the books. The customer says they do not have this on their side and have been through a few admin ladies. It's been about 5 years. Can I write it off? They don't want to take the credit... surprisingly, some people either have a conscience, or, no time to investigate. What would this journal be? CR other income, and I'm sure one would need to pay over the vat as in the case of 'raising an invoice', so to speak. Thanks

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[Dave A]

What would this journal be? CR other income

That's what I do.

and I'm sure one would need to pay over the vat as in the case of 'raising an invoice', so to speak.

Personally, I always raised VAT on the "sundry over/under payment" invoice or credit note I raise to clear these residual amounts. But on reflection - is there a taxable supply of goods or services in these cases?

In my case the potential financial benefit of not raising VAT on the clearing transactions has not been worth asking the question of my auditor, let alone worth the risk of a raised eyebrow it might trigger with SARS.

[Krono9]

On the VAT issue, I think the relevant section that would typically apply to customer credits/overpayments is S8(27) "For the purposes of this Act, where any amount received in respect of a taxable supply of goods or services at the rate specified in section 7 (1) exceeds the consideration charged for that supply, and such excess amount has not been refunded within four months of receipt thereof, that excess amount shall be deemed to be consideration for a supply of services performed by the vendor in the course or furtherance of that vendor’s enterprise on the last day of the tax period during which that four month period ends."