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HMRC internal manual

VAT Bad Debt Relief

Repayment of input tax: What is the due date for payment

Businesses will often agree to allow customers a certain period of time before payment is due, for example 30 or 60 days from the date of invoice. Where time for payment is allowed, input tax is not required to be repaid until 6 months after the time allowed. As well as straightforward arrangements such as those described, there might be a series of payment dates. In the construction and other industries there may be stage payments due at a certain stage of a particular project.

When supplies of goods are made together with supplies of finance, there will often be a series of payments - for instance when the sale is by way of a hire purchase or conditional sale agreement. Such agreements may include provisions that if the customer defaults on the agreement the later payments are brought forward to the time of the default. In that situation the entitlement to relief and requirement to repay input tax would be based upon the accelerated payment dates.

Suppliers may choose not to escalate action against a customer by repossessing goods or taking legal action and instead may give the customer longer than originally envisaged to make payments. This is seen as debt management activity and would not alter the time at which a business is required to repay input tax.