VAT bad debt relief
Produced in partnership with Etienne Wong of Old Square Tax Chambers
VAT bad debt relief

The following Tax guidance note Produced in partnership with Etienne Wong of Old Square Tax Chambers provides comprehensive and up to date legal information covering:

  • VAT bad debt relief
  • EU law
  • Credit notes
  • Bad debt relief
  • VAT groups
  • Written-off and outstanding amounts
  • Allocation
  • VAT-only invoices
  • Administration
  • Subsequent payment
  • more

Brexit: As of exit day (31 January 2020) the UK is no longer an EU Member State. However, in accordance with the Withdrawal Agreement, the UK has entered an implementation period, during which it continues to be subject to EU law. For further guidance, see Practice Note: Brexit—UK tax consequences.

This Practice Note outlines how a taxable person who has accounted for and paid VAT on a supply, but who is not paid the price for that supply, may claim a refund of the whole or part of the VAT that they have paid.

EU law

Under Council Directive 2006/112/EC (the VAT Directive), VAT on a supply is payable by reference to the taxable amount (or value) of the supply, which comprises everything that constitutes consideration obtained or to be obtained by the taxable person (from any person) for that supply.

The corollary is that VAT is not payable on more than the consideration for the supply (the basis of assessment being the consideration actually received).

In the event of cancellation, refusal or total or partial non-payment of the price for a supply, or where the price is reduced after the supply has taken place, the taxable amount of the supply is reduced accordingly.

In the UK, refunds and downward price adjustments are dealt with under the rules on credit notes.

Total or partial