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HMRC internal manual

VAT Retail schemes guidance

Mail order traders: Bad debts: Legal costs incurred by businesses and passed on to customers

Adjustments to the outstanding balance on an agent’s account will need to be made to take account of recoverable court costs, etc which may have been passed on and included in their balance after a debt has gone bad. These costs will form part of the total debt but do not relate to taxable supplies which have been made by the business to the customer. Care should therefore be taken to ensure that such costs are not included in the value upon which bad debt relief is claimed.