Bad debt relief - repayment of VAT by the debtor

By Tolley

The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Bad debt relief - repayment of VAT by the debtor
  • Conditions
  • Calculating the amount of VAT to be repaid
  • Supplier payments

This guidance note provides an overview of the VAT implications on a customer who has not paid for a supply of goods and services. For an overview of the VAT bad debt relief provisions, see the Claiming VAT bad debt relief (BDR) guidance note.

VATA 1994, s 26A; VBDR5000; VAT Notice 700/18 

A customer will be required to repay any VAT recovered to HMRC if the following conditions are satisfied:

  • the supplier has not been paid for the goods / services received
  • the supply was liable to VAT at either the standard or reduced rate
  • the debt has remained outstanding for 6 months after the ‘relevant date’. The relevant date is the later of:
    • the date the supply was made
    • the date that payment was required

Businesses are not required to repay VAT in the following cases:


    More on VAT compliance and bad debt relief: