web
You’re offline. This is a read only version of the page.
close
Skip to main content

Notifications

Announcements

No record found.

News and Announcements icon
Community site session details

Community site session details

Session Id :
Dynamics 365 Community / Forums / Finance | Project Operations, Human Resources, ... / Sales tax direction fo...
Finance | Project Operations, Human Resources, ...
Answered

Sales tax direction for Bad Debts posting

(0) ShareShare
ReportReport
Posted on by Pratik Bhosle 414

Hello Experts

I am reaching out to you guys as I could not find anything similar forum that can answer my query.

The scenario here is : I have to write off customer bad debts for that I pass a journal entry Dr. Bad Debts and Cr. Customer. However, VAT direction for this defaulted to 'Output VAT' where as in theory we are claiming back from the authority and i would like that to be appeared as 'Input VAT'. I have tried posting with different scenarios but they all seem to be posting into 'Output VAT' as credit. 

Is there any way i can hold bad debts under INPUT VAT ?

Please let me have your opinion.

Thanks

PB

I have the same question (0)
  • Ludwig Reinhard Profile Picture
    Ludwig Reinhard Microsoft Employee on at

    Hi PB,

    What tax regime do you apply? That is, for which country/region did you setup your sales taxes?

    Best regards,

    Ludwig

  • Pratik Bhosle Profile Picture
    Pratik Bhosle 414 on at

    Hi Ludwig

    Thanks !

    That's for UK and all VAT matrix is set up correctly as per UK compliant.

  • Suggested answer
    Ludwig Reinhard Profile Picture
    Ludwig Reinhard Microsoft Employee on at

    Hi PB,

    If you follow UK tax law then I would say that the posting is ok if it posts with 'output VAT'.

    That is because the write off is a correction that is made to a previously posted sales transaction that triggered output VAT.

    A change in the sign of the amount posted does in my opinion not change the nature of the VAT from output to input VAT. Therefore, I would say that the behavior you see is ok.

    Best regards,

    Ludwig

  • Pratik Bhosle Profile Picture
    Pratik Bhosle 414 on at

    Hi Ludwig

    I get that and that is what i suggested to client however client being adamant as this is the requirement of UK authority. I am looking for any other possibilities through the journal that can change vat posting to INPUT VAT.

    I can allow manual postings to control accounts to transfer the balance but that something i don't prefer.

    Rgds

    PB

  • Verified answer
    SouravDam Profile Picture
    SouravDam 11,730 on at

    Hi P B,

    You can select the relevant tax code directly in the journal without setting any sales tax group and item sales tax group combination. If so, then I think you will be able to record the VAT the way you are expecting.

    But to do that, you need to set the "Do not allow manual entry" check box disabled for that sales tax main account.

    Otherwise what Ludwig explained, is the best approach for this. Kindly look at the possibility to discuss with the users on this again to sort it out.

    Kindly check and update.

    Best regards,
    Sourav Dam

    Kindly mark this thread 'Yes' if this is answered your query which may help other community members in this forum.

  • Suggested answer
    Ludwig Reinhard Profile Picture
    Ludwig Reinhard Microsoft Employee on at

    Hi PB

    I would suggest challenging the client on that one and asking to get a confirmation by their tax auditor/advisor before considering to make a change here.

    best regards

    ludwig

  • Suggested answer
    SouravDam Profile Picture
    SouravDam 11,730 on at

    Hello P B,

    Any progress on this case please?

    Best regards,
    Sourav Dam

    Kindly mark this thread 'Yes' if this is answered your query which may help other community members in this forum.

  • Ludwig Reinhard Profile Picture
    Ludwig Reinhard Microsoft Employee on at

    Hi P B,

    Have you been able to get this issue resolved?

    Is there anything else this community can help you with?

    Would be great if you could keep us updated.

    Many thanks and best regards,

    Ludwig

  • Pratik Bhosle Profile Picture
    Pratik Bhosle 414 on at

    Hello Sourav / Ludwig

    First of all thank you for your time and patience and apologies for the delay in replying.

    I am still working on the case and have challenged client too, but there is a compliant by local government and you are not suppose to declare as OUTPUT VAT. In that case I have found two work around :

    1) Posting journal straight to nominal code by transferring from one to another - this is the last option that i would like to use.

    2) Using dummy supplier as intermediate to settle between creditor and debtor e.g

    Posting 1 - General Journal

    Dr. Bad Debts

    Cr. Supplier (instead of Customer) this way i get INPUT VAT on bad debt transaction

    Posting 2 - Use same general journal add new line

    Dr. Supplier

    Cr. Customer

    Last mark the settlement between sub-ledgers to clear open items.

    I am not sure how the 2nd solution will work, it adds up extra line to user but solve the purpose without touching nominal code.

    Please advise whether it's doable ?

    Thanks

    PB

  • Verified answer
    Ludwig Reinhard Profile Picture
    Ludwig Reinhard Microsoft Employee on at

    Hi PB,

    If your client insists on that then I would say that this looks like a feasible workaround.

    The main pain point is the posting step no 2 where you probably have to manually settle the lines between the dummy supplier and the customer.

    If you have only some cases for which this is needed then users can do it manually.

    Otherwise, some kind of coding might help accelerating the job.

    Please let us know if there is something else the community can help you with.

    Otherwise, it would be great if you could verify the answers to get this thread completed.

    Best regards,

    Ludwig

Under review

Thank you for your reply! To ensure a great experience for everyone, your content is awaiting approval by our Community Managers. Please check back later.

Helpful resources

Quick Links

Responsible AI policies

As AI tools become more common, we’re introducing a Responsible AI Use…

Neeraj Kumar – Community Spotlight

We are honored to recognize Neeraj Kumar as our Community Spotlight honoree for…

Congratulations to the November Top 10 Community Leaders!

These are the community rock stars!

Leaderboard > Finance | Project Operations, Human Resources, AX, GP, SL

#1
Martin Dráb Profile Picture

Martin Dráb 451 Most Valuable Professional

#2
André Arnaud de Calavon Profile Picture

André Arnaud de Cal... 428 Super User 2025 Season 2

#3
BillurSamdancioglu Profile Picture

BillurSamdancioglu 239 Most Valuable Professional

Last 30 days Overall leaderboard

Featured topics

End-of-life Announcement for Microsoft Dynamics GP

Product updates

Dynamics 365 release plans