Bad debt relief

Reclaiming VAT you paid over on an invoice the customer never paid.

What it means

VAT bad debt relief allows recovery of VAT accounted for on a supply where the debt has remained unpaid for at least six months and has been written off in the accounts.

Why it matters

Without it you have paid HMRC VAT on money you never received. It is routinely unclaimed.

What it looks like in practice

Conditions: the debt is over six months old from the due date, has been written off in the accounts, and the supply was at open market value.\n\nCash accounting avoids the problem entirely.

What to watch out for

Writing off in the accounts and forgetting the VAT claim, which is a separate step on the return.

Where to get proper advice

Your accountant.