Hi - I have dealt with VAT Bad Debt Relief some time ago but having recently started dealing with a new company they have rasied questions that have confused me!
a) An accountant 'friend' of the company told them they couldnt claim bad debt relief if they hadnt received formal bankruptcy papers from the customer - I didnt think the customer had to be bankrupt in order for you to claim back the VAT?
b) This company werent aware of being able to claim back the VAT and therefore they have a bad debt on their accounts from July 2010 which was when the VAT rate was back to 17.5%? Do I need to adjust anything as we are now into the 20% rate? Can I just claim it back as normal but at the rate that was applied at the time?
I havent had to deal with the two different VAT rates for Bad Debts before so any help would be great, thank you.
If I remember correctly you can reclaim the VAT if the debt is not recoverable, it is at least 6 months old and you have written it off. I don't believe you need bankruptcy to proceed. If the VAT your client paid was 17.5% then that's the amount they can claim back as the whole point is to get back the VAT money they paid, not more than that, so it wouldn't make sense to claim back 20% as the client did not pay that much at the time.
Hope this helps.
Fabs
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