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Bad debt relief ― repayment of VAT by the debtor

Produced by a Tolley Value Added Tax expert
Value Added Tax
Guidance

Bad debt relief ― repayment of VAT by the debtor

Produced by a Tolley Value Added Tax expert
Value Added Tax
Guidance
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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.

Conditions

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 six months after the ‘relevant date’. The relevant date is the later of:

    1. â—¦

      the date the supply was made

    2. â—¦

      the date that payment was required

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

  1. •

    import VAT

  2. •

    acquisition VAT (from 1 January 2021 payable on goods acquired in Northern Ireland from EU member states)

  3. •

    VAT recovered under VATA 1994, s 33

  4. •

    VAT

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  • 14 Sep 2022 10:02

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