[Question] What document/journal should one use to write off debt as irrecoverable?

[Hp10Bii]

What document/journal should one use to write off debt as irrecoverable?

If the supplier follows the below publication,

https://www.cliffedekkerhofmeyr.com/en/news/publications/2017/Tax/tax-alert-9-june-The-VAT-implications-of-the-sale-of-book-debts-written-off.html

Then the question is, How should you write of customer's irrecoverable debt?
If you use a credit note to write off the debt as irrecoverable and to use it a supporting documentation when you claim the Output-VAT back from SARS which you paid when you issued the original invoice, then I assume you would have to send the credit note to the customer to inform them that they would have to repay the Input-VAT which they claimed from SARS on the original invoice which you issued them.
Therefore this Credit Note would make the customer think that they don't owe you the money anymore.

However as the above Link publication states, the write off of the debt as irrecoverable does not release the customer from the obligation to pay the amount owed

Any further clarification would be much appreciated

[Mike C]

Hi HP10Bii - our auditors used a Customer Journal to write it off - Debit to 3150/000 "Bad Debts" and Debit the VAT amount to 9500/000 VAT Control Account. Then Credit the Customer Account.

Found this interesting article from http://thevatlady.co.za/2017/06/14/claimonbaddebts/

SARS threatens to disallow your input tax claims

The problem is, if you claim input tax for bad debts (in block 17 of the VAT return), SARS is threatening to disallow your deductions,
unless you can prove you handed the debt over for collection. Or some other type of legal follow-up has taken place to prove you tried to collect the debt.

This is an illegal action on the part of SARS!

And the reason it’s illegal is because Section 22(1) of the VAT Act doesn’t say, you must be able to prove the debt has been handed over for collection.
The Law just says if an amount becomes irrecoverable, and you’ve already paid over the VAT, you claim the input tax.
Remember this the next time you make an input tax claim for bad debts, and the SARS auditors ask for proof of collection attempts.
Refer them to Section 22(1) of the Act.

[dellatjie]

Just for interest sake - where the customer has not paid you for 12 months (assuming they are registered for VAT) should pay back the input tax to SARS.

(3) Subject to subsection (3A), where a vendor who is required to account for tax payable on an invoice basis in terms of section 15—

(a)

has made a deduction of input tax in terms of section 16 (3) in respect of a taxable supply of goods or services made to him; and

(b)

has, within a period of 12 months after the expiry of the tax period within which such deduction was made, not paid the full consideration in respect of such supply,

[Para. (b) substituted by s. 95 of Act No. 30 of 1998.]