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HMRC internal manual

VAT Bad Debt Relief

Introduction: What are the conditions for claiming relief?

In order to claim relief all of the following conditions must be met.

  • The supply was made on or after 1 April 1989.
  • The debt is over six months old.
  • The debt has been written off in the refunds for bad debt account.
  • The claimant has a separate refunds for bad debt relief account (which may be maintained outside normal accounting systems) containing the following information:

    • the outstanding amount to which the claim relates,
    • the period in which the tax was accounted for and paid to HMRC,
    • the amount of bad debt relief claimed,
    • the period in which the claim was made,
    • the amount of VAT chargeable on each supply,
    • any payment received for the supply,
    • the date and number of each invoice issued; if no invoice has been issued the supplier must detail the date, the name of the purchaser and the nature of
        the supply;


  • The claimant has already accounted for and paid the tax being reclaimed, via a VAT return or assessment.
  • For supplies made before 19 March 1997 relief is only available, in the case of a supply of goods, where property has passed to the customer. This condition is met if the customer has sold the goods and the purchaser has acted in good faith.
  • The value of the supply concerned cannot exceed the open market value.