VAT – Bad debt relief claims

April 2017

The UK VAT Bad Debt Relief scheme was introduced in 1978 and allows for VAT output tax to be reclaimed on sales that remain unpaid, subject to certain conditions. Whilst these conditions have been amended over time, recent litigation questioned the bad debt relief legislation that existed between 1978 and 1997:
• before 1 April 1989, the scheme required the defaulting customer to be formally insolvent
• until 19 March 1997, there was also a condition that title in any goods must have passed to the customer.

The Court of Appeal has found that the above conditions were disproportionate.
Whilst it was also decided that it was too late to make claims under the scheme that existed before 1 April 1989, there is an opportunity to make a claim relating to the supplies of goods made in the period 1 April 1989 and 19 March 1997.
If you would like to discuss this opportunity further then please do not hesitate to contact Gavin Tucker, Director of VAT on 07966 250 866.

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