In a significant development the VAT and Duties Tribunal has released a decision that impacts favourably on the entitlement to claim VAT Bad Debt Relief for Insolvency Practitioners.

UK law states that VAT Bad Debt Relief can only be claimed if VAT on the original supply has been accounted for on a VAT Return and paid to HM Revenue & Customs (HMRC). However, in the case of Times Right Marketing Limited the Tribunal has now held that where VAT due on a Return has not been paid, VAT Bad Debt Relief is nevertheless available to the extent that credit has been taken for VAT on purchases.

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What should you do now?

Consider current or cases within the last three years to see if there are opportunities to claim Bad Debt Relief either where you thought this was not possible or where HMRC have rejected a claim because the VAT Return had not been paid. You will need to consider all the conditions that must be met before VAT Bad Debt Relief is claimed and the implications of the decision when not all VAT due on sales is attributable to bad debts.

Whilst there is the possibility that HMRC may appeal this decision, it is important to act immediately as the capping rules mean that claims for supplies made more than three years and six months ago will not be accepted.

If you would like to discuss the implications of this decision or any other VAT matter, please contact Amy Waterhouse in Birmingham (0121 452 1515), Tony Jackson in London (020 7024 8370) or Barry Stocks/Mike Marsden in Manchester (0161 837 1870).