Accounting for a half paid invoices following administration

Ginger_Winner

Hi everyone,

I run a VAT registered limited company. The company is just me and I invoice for my consultancy services. Accounting is generally very straight forward so I do it myself. I have however, recently encountered a situation that I don't know how to deal with from an accounting perspective, so I thought I'd post on here in case anyone can help me out...

I had two unpaid invoices from a company that has subsequently gone into administration. The administrator successfully found a buyer and I have received a payment equivalent to 50% of the outstanding debt. This payment has been made into my company's bank account from a solicitor acting on the instruction of the administrator. While this is not a fantastic situation I take the view that 50% of the debt is significantly better than 0%! Anyway, this leaves me with a conundrum with my accounting...

So my questions are:

- How should I account for this 50% payment?
- Do I need to in some way cancel the previous invoices?
- Should I raise a new invoice for this payment from the solicitor?
- Is VAT payable on this payment as it would be on a typical invoice for my services?

Any advice would be gratefully received....
 

Jeremy535897

See https://www.gov.uk/guidance/relief-from-vat-on-bad-debts-notice-70018

penners324

Create a credit for half the invoice value. With the expense going to bad debt. The credit note is vatable.