Bad debt relief ― repayment of VAT by the debtor

Produced by a Tolley Value Added Tax expert

Value Added Tax

Guidance

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:

•
the supplier has not been paid for the goods / services received
•
the supply was liable to VAT at either the standard or reduced rate
•
the debt has remained outstanding for six months after the ‘relevant date’. The relevant date is the later of:
1. ◦
  the date the supply was made
2. ◦
  the date that payment was required

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

•
import VAT
•
acquisition VAT (from 1 January 2021 payable on goods acquired in Northern Ireland from EU member states)
•
VAT recovered under VATA 1994, s 33
•
VAT

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