Bad debt relief and VAT compliance

Sarah Kay, tax writer at Croner-i, reviews the new scheme for claiming bad debt relief on VAT declarations and highlights why the ‘old’ scheme continues to be considered by the courts 

Bad debt relief enables suppliers who have accounted for VAT on a supply to recover that VAT in cases where they do not receive payment from their customer. A bad debt relief scheme is needed because in many cases the time of supply, or tax point, is not determined by reference to the date of payment by the customer and, as a result, suppliers frequently have to declare VAT on their VAT returns before they have been paid.

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