Relief for a debt that is never paid
You paid HMRC the VAT on an invoice, and then the customer never paid you. Learn when that VAT can be claimed back, and the entry.
This path is practice in how the records and the sums work. It is not tax advice. Any rate or allowance in a question is an example for that question, so check GOV.UK for the current figures.
Task 1The problem and the conditions3 questions
Under the normal rules, output tax is owed to HMRC from the tax point, whether or not the customer has paid. If the customer never pays, the seller has handed over VAT it never received.
Bad debt relief lets the seller claim that VAT back. The claim is made on a VAT return, as part of the input tax.
- The debt must be more than six months old, counted from the date payment was due, or from the date of the sale if that is later
- The debt must have been written off in the seller's books
- The output tax on the sale must already have been paid to HMRC
There is also a final time limit for making the claim. It is on GOV.UK.
Task 2The figures and the entry4 questions
Task 3Part payments, and the customer's side3 questions