VAT on bad debts

Fortunately the VATman recognises that businesses suffer bad debts from time to time and allows you to claim back VAT relating to those bad debts.

Once the debt is older than 6 months you can claim back the VAT through your quarterly VAT return. If you haven’t done this in the past you can make a claim now for any bad debts incurred in the last 3 years.

All you do is make an appropriate adjustment on the ‘input box’ on your VAT return. If the bad debtor subsequently pays up you do have to make another adjustment to reverse any claim previously made.