Seven conditions to claim VAT relief

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Seven conditions to claim VAT relief

In these uncertain times, it is likely that most businesses will experience bad debt. Whilst efforts can and should be made to recover these balances it is sometimes not possible to do so and the impact on cashflow can be significant. However, one important tool to take note off is the bad debt relief which a VAT registered business can recoup from HMRC.

This relief will allow you to reclaim the VAT element of the supply of goods or services which have subsequently not been paid for and as a general rule, relief must be claimed within 4 years and 6 months of the later of the date payment was due and payable or the date of supply.

There are seven conditions to claim VAT relief which include.

  1. Account for the VAT on the supplies and pay it to HMRC.
  2. Write off the debt in your usual VAT account(s) and transfer it to a separate bad debt account.
  3. The value of the supply must not be more than the customary selling price.
  4. The debt must not have been paid, sold, or factored under a valid legal assignment.
  5. The debt must have remained unpaid for a period of 6 months after the later of the time payment was due and payable and the date of the supply
  6. If the goods were supplied before 19 March 1997, ownership must have passed to your customer, or through the customer to a third party.
  7. For supplies made to a VAT-registered customer between 26 November 1996 and 30 April 1997, you must send a notice to them. A copy of the notice must also be retained.

A claim for bad debt relief can be made after the 6th month when payment was due or the date of supply

Further guidance can be found here, and for further advice contact us at

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