Accessibility links

  • Skip to content
  • Accessibility Help

You are using an outdated browser. Upgrade your browser today for a better experience of this site and many others.

MENU
  • Home
  • About us
  • Services
    • Overview
    • Business start-up
    • Compliance services
    • Consultancy & systems advice
    • Investments & Pensions
    • Support services
    • Taxation
  • Factsheets
    • Overview
    • Capital taxes
    • Corporate and business tax
    • Employment and related matters
    • Employment issues (tax)
    • General business
    • ICT
    • Pensions
    • Personal tax
    • Specialist areas
    • Starting up in business
    • VAT
  • Resources
    • Overview
    • accSEND
    • Downloadable forms
    • Market data
    • Online calculators
    • Tax calendar
    • Tax rates & allowances
    • Useful links
  • News
    • Overview
    • Autumn Budget
    • Spring Statement
    • Hot Topic
    • Latest News for Business
    • Today's Headlines
  • Contact us
J R Watson & Co Accountants

Northampton: 01604 630745 Rugby: 01788 575037 Email us

VAT - bad debt relief

This factsheet explains the situations where the VAT bad debt relief applies.

  1. Factsheets
  2. VAT

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. We explain the situations where the relief applies. If your business is in the Northampton and Rugby area we, at J R Watson & Co Accountants can provide any further information you require on VAT matters.

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.

The Conditions for Relief

In order to make a claim a business must satisfy the following conditions:

  • goods and services have been supplied and the VAT in question has been accounted for and paid
  • six months has elapsed since the later of the date of supply and the due date for consideration, whichever is the later
  • all or part of the outstanding amount must have been written off in the accounting records as a bad debt (in the ‘refunds for bad debts account’).

Making the Claim

A claim is made by entering the appropriate amount in Box 4 of the VAT return for the period in which entitlement to the claim arises (or any permissible later period).

Records

Businesses making bad debt relief claims must keep records for four years from the date of the claim to show:

  • the time and nature of supply, purchaser and consideration - normally a VAT invoice will show this
  • the amount of VAT and the accounting period it was paid to HMRC
  • any payment received for the supply
  • details of entries in the ‘refunds for bad debts account’.

Repayment of Input Tax by Purchaser

Where a customer has not paid a supplier within six months of the date of the supply or, if later, the date payment is due, VAT previously claimed as input tax, must be repaid. This puts a burden on all VAT registered traders to monitor their transactions to anticipate whether they need to reverse any input tax recovered on goods received from suppliers.

How we can help

If your business is in the Northampton and Rugby area we at J R Watson & Co Accountants would be pleased to help with further advice on VAT bad debt relief.

VAT - a summary VAT - annual accounting scheme VAT - bad debt relief VAT - cash accounting VAT - flat rate scheme VAT - Making Tax Digital VAT - seven key points for the smaller business

The latest news

04 Dec 2019

Making sure gifts to employees are tax-free

Some employers may wish to give a small gift to their employees.

04 Dec 2019

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which took effect from 1 December 2019.

04 Dec 2019

HMRC offers tips on avoiding Self Assessment tax scams

HMRC is giving information to taxpayers to help them avoid scams ahead of the Self Assessment deadline.

Home | Site map | Accessibility | Disclaimer | Privacy | Help |

© 2019 J R Watson & Co Accountants. All rights reserved.

Northampton Office: Eastgate House, 11 Cheyne Walk, Northampton, Northamptonshire NN1 5PT

Rugby Office: Sir Frank Whittle Business Centre, Great Central Way, Rugby, Warwickshire CV21 3XH


We use cookies on this website, you can find more information about cookies here.

powered by totalSOLUTION

Would you like to download our mobile app from the App Store?

Download
x