Bad debt relief claims

The VAT Tribunal has allowed an appeal against HMRC's decision to refuse to pay retrospective claims for VAT bad debt relief (BDR). The decision is based on two technical points and the interaction of EU and UK law. 

It appears that this decision creates an opportunity for retrospective BDR claims by taxpayers who were prevented from making claims:

• for the period from 1 January 1978 to 31 March 1989, because of an 'insolvency' condition (where the customer in question had become insolvent - a specific condition that applied at that time) and/or because of the unlawful imposition of time limits; and/or
• for the period from 1 January 1978 to 19 March 1997 because of the 'reservation of title' condition. This is where supplies of goods were made and title to the goods had not passed to a customer who defaults on their payments.

If you have in the past made bad debt relief claims that were refused by HMRC for the above periods or failed to make bad debts claims due to the conditions above, this ruling may mean that you are entitled to make a claim for a refund of VAT.

For assistance in making a claim, please contact Darren Aldrich, VAT partner.