VAT Bad Debt Relief: A Guide

• VAT-registered businesses usually pay output VAT when invoicing, even if the customer never pays, so Bad Debt Relief (BDR) can recover that VAT.
• BDR can be claimed only if VAT was accounted for and paid, the debt is written off in the records, and at least 6 months (but not more than 4 years 6 months) have passed since supply or due date.
• Businesses must keep detailed records for 4 years, including supply details, VAT amount, return period, payments received, and bad debt write-off entries.
• The claim is made on the VAT return (Box 4) for the period when the debt becomes over 6 months old.
• If the customer later pays, the refunded VAT must be repaid; debtors also need to adjust input tax if they have not paid suppliers within 6 months.

Source: marcusward.co

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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