Claiming VAT bad debt relief (BDR)

Produced by a Tolley Value Added Tax expert

Value Added Tax

Guidance

This guidance note provides an overview of VAT BDR provisions. For an overview of the VAT implications on a customer who has not paid for a supply of goods and services, see the Bad debt relief ― repayment of VAT by the debtor guidance note.

For a video overview of the bad debt relief provisions, see the Bad debt relief video.

What are the conditions required to claim VAT relief on bad debts?

A business can recover VAT paid to HMRC on supplies of goods and services if the customer has not paid and the following conditions are satisfied:

•
the business must have charged VAT at either the standard or reduced rate
•
the VAT charged must have been accounted for to HMRC
•
the VAT amount must have been written off in the VAT accounts and have been transferred to a special VAT bad debt account
•
the value of the supply must not exceed ‘open market value’
•
the debt must not have been transferred, sold or factored under a

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