The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
This guidance note provides an overview of VAT BDR provisions. For an overview of the VAT implications on a customer who has not paid for a supply of goods and services, see the Bad debt relief ― repayment of VAT by the debtor guidance note.
A business can recover VAT paid to HMRC on supplies of goods and services if the customer has not paid and the following conditions are satisfied:
the business must have charged VAT at either the standard or reduced rate
VAT must have been accounted for to HMRC (see below)
the VAT amount must have been written off in the VAT accounts and have been transferred to a special VAT bad debt account
the value of the supply must not exceed ‘open market value’
the debt must not have been transferred, sold or factored under a valid legal assignment
the debt must have remained unpaid for at least six months from the later of:
the date payment was due
the date of the supply
VATA 1994, s 36(1), (4)(a); SI 1995/2518, reg 165A(1); VBDR1500
Businesses should never issue a credit note in order to recover VAT incurred on a bad debt.
The business has the right of appeal if HMRC denies a claim for BDR. Please see the Appealing an HMRC decision ― outline guidance note for more information.
One of the conditions stated above indicates that the VAT must have been paid to HMRC. In this case, TRML appealed against a decision by HMRC to reject a claim for BDR on the basis that the company had not originally paid the output VAT due. The Tribunal found that the deduction of input tax from output tax due should be seen as, in effect, payment of that output tax. HMRC has stated that where a BDR claim is made, payment will be taken to have been made to the extent that output tax is covered by
**Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason.
Access this article and thousands of others like it free for 7 days with a trial of TolleyGuidance.
Read full article
Already a subscriber? Login
This guidance note explains how to calculate the amount of tax that arises under the lifetime charge. In general terms the lifetime charge will apply to individuals who transfer property into a trust that is subject to the relevant property regime. See the Chargeable transfers and Occasions of
The corporate interest restriction (CIR) essentially limits the amount of interest expense a company can deduct from its taxable profits if the interest expense is over £2 million. The actual mechanics of the CIR calculation are highly complex (the legislation is over 150 pages long) and are
This guidance note provides an overview of the steps businesses need to take if aspects of their business change, and as a result, they need to notify HMRC about the change.Changes to name and / or addressIf a business changes its name and / or its address then it is required to notify HMRC of the
This guidance note provides an overview of what conditions need to be met before a business is entitled to treat VAT incurred as input tax. This note should be read in conjunction with the other notes in the ‘Claiming input tax’ subtopic. For a flowchart outlining the procedure for claiming input
To view our latest tax guidance content, sign in to Tolley Guidance or register for a free trial.