Share this content
0
272

Claiming VAT Bad Debt Relief for multiple payers

Have I interpreted how this works correctly?

Didn't find your answer?

Search AccountingWEB

We're building a feature into our software that allows clients to automatically claim VAT relief on written off bills.

One common live scenario is where bills are split Net:VAT between 2 or more payers (Legal insurance work).  In a scenario where one payer settles the net amount but the 2nd payer does not settle the VAT and it is written off, I want to be sure the claim would be correct as VAT isn't my strongest topic albeit having a working knowledge.

My understanding is that payments from each payer are treated as a gross payment for the purposes of bad debt relief.  So:

Payer 1 owes net of £500

Payer 2 owes VAT of £100

Payer 1 settles £500

Payer 2 defaults.

For the purposes of the VBD relief claim, the payment from P1 is treated as a gross payment inclusive of VAT (so 500/6 = 83.33 VAT attributed to this payment that cannot be claimed), so the remaining £100 VAT can only be claimed at the same fraction (100/6 = 16.67 claimed for VBD Relief).

I think I'm on the right track with this, but any correction/advice would be appreicated!

Replies

Please login or register to join the discussion.

14th Jun 2019 10:37

Your thinking is correct. Although in practice one payer pays the VAT, and the other the net amount, from HMRC's point of view, each is a part payment for the supply, so BDR is available on the balance.

Thanks (1)
avatar
By MAATey
to leshoward
14th Jun 2019 10:47

Thanks Les. That makes sense.

That was also my thinking, re your second sentence, but I didn't put it across as succinctly! Grateful for the reassurance though, thank you.

Thanks (0)
avatar
14th Jun 2019 10:48

Not only are you spot on, it's a major relief to see an OP where you can actually understand (1) what is being asked, (2) why it is being asked, and (3) the ability of the OP to understand any answers. This last happened in 1983.

Thanks (2)
avatar
By MAATey
to Vile Nortin Naipaan
14th Jun 2019 11:19

Hah! This is a very rare ego stroke that I'm going to smugly hold on to with pride, thank you! Appreciate you confirming for me.

Thanks (0)
Share this content