Bad debt relief — repayment of VAT by the debtor

Produced by Tolley
Bad debt relief — repayment of VAT by the debtor

The following Value Added Tax guidance note Produced 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
  • Insolvency
  • Disputes

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.


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

  1. the supplier has not been paid for the goods / services received

  2. the supply was liable to VAT at either the standard or reduced rate

  3. the debt has remained outstanding for 6 months after the ‘relevant date’. The relevant date is the later of:

    1. the date the supply was made

    2. the date that payment was required

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

  1. import VAT

  2. acquisition VAT (payable on goods acquired from other EU member states)

  3. VAT recovered under VATA 1994, s 33

  4. VAT recovered under the eight

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