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HMRC internal manual

VAT Refunds

Four year cap - other provisions: Regulation 165A - Bad debt relief: Operation of the time limit - Transitional provisions

The three year time limit was introduced with effect from 1 May 1997 and the Regulation provides, at paragraph (3), that where, in relation to a supply for which a business hasn’t been paid, the later of the dates on which consideration for the supply was due and payable and the date on which the supply was made fell before 1 May 1997, there is no time limit at all on any claim for bad debt relief in relation to that supply.

For example, Aiya Ltd makes a supply on 1 April 1997 and payment for that supply falls due on 1 June 1997. If, by 1 December 1997 the company has not been paid for that supply, it will be entitled to make a claim for bad debt relief in respect of that supply. However, because the later of the date of the supply and the due date for payment was after 1 May 1997, he only has until 1 December 2000 to make his claim.

If, on the other hand, the supply was made on 1 March 1997 and payment fell due on 1 April 1997, he would be entitled to make his claim for bad debt relief on 1 October 1997 and there would no time limit on the time after that for making his claim.