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Relief from VAT on bad debts

Posted: 12th Aug 2019 by Robert Salenius Taxation

VAT bad debt relief allows businesses that have made supplies on which they have accounted for and paid VAT but for which they have not received payment to claim a refund of the VAT.

It is quite possible within the VAT system for a business to be in the position of having to pay over VAT to HMRC while not having received payment from their customer.

Bad debt relief allows businesses, that have made supplies on which they have accounted for and paid VAT but for which they have not received payment, to claim a refund of the VAT by reference to the outstanding amount.

Our tax expert, Robert Salenius, provides some helpful guidance.

How long do I have to wait before I can claim debt relief?

You must wait at least six months from the later of:
a) When payment was due and payable
b) The date of the supply

Are there any other conditions?

Yes, there are other conditions including having already accounted for the VAT and paying it to HMRC and writing off the bad debt in the accounting records.

How do I claim bad debt relief?

You include the amount of the VAT in Box 4 of your VAT Return. There are record keeping requirements to be followed such as the sales invoice, the amount of VAT and the accounting period it was paid to HMRC.

Is there anything else I should know?

Yes, if you have not paid a supplier more than six months after the date the supply took place and you have claimed back the input tax, you must repay it to HMRC.

Where can I find further information?

Please refer to our bad debt relief factsheet.

If you would like further advice on VAT bad debt relief, please get in touch with a member of our Tax team:


T: 01904 655202
Or email
nigel.atkinson@hghyork.co.uk
robert.salenius@hghyork.co.uk
paul.morris@hghyork.co.uk
claire.hodsman@hghyork.co.uk