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VAT Bad Debt Relief

As the economic downturn continues, putting pressure on cashflows, perhaps now is time to review your debtor lists to see if VAT Bad Debt Relief claim can be made.

This relief allows you to reclaim VAT originally accounted for from HM Revenue & Customs. It is available when at least six months have passed since you originally supplied the goods or the due date of payment. It is not necessary for you to have written off the debt in the accounts but you must have already included the amount claimed in a previous return and paid the VAT.

For each bad debt claimed you will need to keep a record of the amount of VAT involved, the VAT period the tax was originally accounted for, a copy of the invoice and the VAT period you made the claim in. These records must be kept for four years from the date of the claim.

You can claim VAT bad debt relief up to four years and six months after the later of the date of supply or the due date of payment.