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VAT - Bad debt relief when customer goes into liquidation

VAT - Bad debt relief when customer goes into...

I am aware of the normal 6 months bad debt relief rule.

But if the customer goes into liquidation and there is no chance of recovering the amount due, can vat relief be claimed even though the debt is less than 6 months old?

Thanks

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04th May 2012 14:22

Sadly not

I was in this position some years ago and HMRC said the client had to wait 6 months even though their customer had gone into liquidation.

Ouch.

M

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By Hansa
04th May 2012 16:14

As an ex IP ...

Unfair though it seems, the reason is that  the liquidator could recover sufficient to pay some or all of creditors' claims.  

If (by some miracle) the liquidator's final report showing (for example) a zero distribution, was issued in less than 6 months then you might have an argument in that the bad-debt had crystallised.  The fastest liquidation I ever achieved was just under a year!

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