BB/9B/97 Changes to the VAT bad debt relief scheme
Business Brief, Issue 9. 27 March 1997
Customs and Excise laid secondary legislation on 26 March to introduce a number of changes to the VAT bad debt relief scheme. These changes were originally announced by the Chancellor in his Budget on 26 November 1996 (Budget Notice BN 48/96).
Details of how and when each of the changes will operate are set out below.
Repayment of input tax by customers
For supplies made after 26 November 1996 (Budget day) customers are required to repay to Customs any input tax which they have previously claimed in respect of supplies for which they have not paid and for which their supplier has claimed bad debt relief.
Since claims cannot be made for at least six months, the earliest this change will have practical effect is 27 May 1997.
The repayment to Customs should be made by means of a negative entry in the VAT allowable portion of the customer's VAT account for the prescribed accounting period in which bad debt relief was claimed by the supplier.
Customers who subsequently pay all or part of their debt can reclaim the input tax by means of a positive entry in the VAT allowable portion of the VAT account for the prescribed accounting period in which the payment is made. The amount adjusted will be the VAT fraction of the payment made.
Notifying of claims by suppliers
Suppliers who make a claim for bad debt relief are being required to notify the