VAT – Bad debt relief – An important administrative VAT point

30th May 2017

Several years ago changes were made to the H M Revenue & Customs policy regarding recovery of output VAT paid over but which hadn’t been received within 6 months of the due date.  Relief for the output VAT can now be obtained much more easily than under the historic process whereby notification was required to the customer.

 

There is also a 4 years 6 months rule for claiming such bad debt relief. This timeframe is calculated from the date the payment became overdue, or if an agreement for payment is in place, the date the agreement was broken.   Once this period has passed, it will no longer be possible to reclaim the output VAT and will become a cost to that company. It is important to be aware that the time limit exists, but also for businesses to use the rules to their advantage to improve their cash flow position.

 

The standard rule for claiming bad debt relief on output VAT is 6 months after the later of the time payment was due to be paid and the date of the supply. To claim this relief you should include the amount of the VAT you are claiming in Box 4 of your VAT return which covers the date when you fulfil the conditions to make a claim. Any bad debt relief claimed requires a future declaration of output VAT on any subsequent amounts received.

 

NB: This timeframe (6 months after due date) also applies to creditors which remain unpaid where any input VAT claimed should be repaid to H M Revenue & Customs.



 
Other items in Blogs
 
Richard Alecock
11th May 2018 Bury St. Edmunds and Mildenhall clients attend the last in our MTD Seminar series

Thursday evening saw the last in our successful series of MTD seminars, held at Memorial Hall in Newmarket, where we had another great turnout. We explained to our clients and guests the implication of  MTD that launches for VAT registered businesses over the VAT threshold starting in April 2019 and how those changes would directly…

Read More »

Rebecca Marley
9th May 2018 iZettle – Taking payments has never been so easy

iZettle was founded in Stockholm in 2010 and have attempted to revolutionise mobile payments with the first mini chip card reader and software for mobile devices. Their commerce platform for small businesses in Europe and Latin America provides tools to get paid, sell smarter and grow your business. Some of the huge benefits are: Automatically…

Read More »

Donna Gidney
9th May 2018 Latest MTD seminar held at our March office

The latest of our series of MTD seminars was held at the March office last night. This was well attended and gave clients an overview of MTD and what it means for them. The presentation was followed by a Xero demonstration, which highlighted the benefits of moving to a cloud based package over and above…

Read More »

Amanda Newman
3rd May 2018 MTD delayed further is not the case

HMRC have recently issued further information regarding MTD , stating prioritising EU exit work is delaying plans to introduce further digital services for individuals. This however ONLY affects simple assessment and real time tax code changes, HMRC are still striving to encourage further uptake of personal tax accounts. Simple assessment was intended to take two…

Read More »

Richard Alecock
1st May 2018 Bury St. Edmunds and Mildenhall clients attend latest MTD Seminar

Friday evening saw the next in our series of MTD seminars, held at our Bury St. Edmunds office, where we had a full turnout. We explained to clients the implication of  MTD that launches for VAT registered business over the VAT threshold starting in April 2019 and how the changes would directly affect them, as…

Read More »

Stephen Malkin
1st May 2018 CITB Levy: Changes in calculation basis

Builders will probably now be aware that the basis for calculating how much their annual payment is under the Construction Industry Training Board (CITB) has recently changed:     Old Basis New Basis Levy on employees 0.5% 0.5% Levy on labour only sub-contractors 1.25% 0% Levy on payments to sub-contractors with Net CIS status 0%…

Read More »