Have you de-registered for VAT recently? Don’t forget to claim back the VAT on any bad debts.

Claiming back VAT

Many small businesses VAT registered in the first instance to take advantage of the flat rate scheme. Following the recent 2017 budget many of these advantages no longer remain and many small businesses now need to consider whether it’s better to de-register – see here.

Once that step has been taken and the application has been lodged, it’s best to complete the final VAT Return as soon as possible so that the final VAT amount due can be calculated and budgeted for.

In cases where sales invoices issued before date of de-registration have not been paid it is possible to claim VAT bad debt relief.

For a claim to be accepted the following criteria need to be met:-

  1. The debts must be at least six months old
  2. The debts must have been written off in your books of account

VAT to be reclaimed is calculated at the full rate of VAT that would have been applied had the business NOT been using the flat rate scheme.

Bad debt relief claims would normally be included on a VAT return but any claims made after deregistration require completion of form VAT427. This form can be completed online but must be printed, signed and submitted to HMRC by post. Copies of original invoices are generally not required for claims under £20,000 unless specifically requested by HMRC. The online form can be found here.

In the unlikely event that you have any very old bad debts relating to invoices issued before 19 March 1997, it is now possible to claim VAT bad debt relief on those debts as well. These will generally be debts relating to goods sold under contracts where retention of title terms applied. HMRC has issued a Brief (01/2017) that details the conditions under which those historical bad debt relief claims will be accepted.

Need help with your VAT claim

If you need any assistance or advice on claiming back VAT please don’t hesitate to get in touch.

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