The FTT has made a distinction between ‘monies diverted’ and ‘monies stolen’ in relation to a VAT bad debt relief claim.
In the case of Total Catering Equipment Ltd, a company employee had diverted certain credit and debit card payments into his own personal bank account. HMRC denied the company bad debt relief.
- Where an employee diverts monies into his own bank account, so that the company never receives the money, bad debt relief is allowed.
- Where an employee steals monies received by the company, bad debt relief is not allowed. This is because the company did receive consideration for its supplies.
It is disappointing that HMRC failed to make this distinction in its decision and subsequent review, and even continued this approach at Tribunal.
The pleasantly short decision is here: http://www.bailii.org/uk/cases/UKFTT/TC/2019/TC07184.html