In a rather messy case, not helped by inconsistent evidence, the FTT determined that a supply of goods HAD been made. It followed that, since payment had not been made, that VAT relief was only available under bad debt relief rules.
The taxpayer delivered the goods and raised invoices, showing around £50k of VAT. Upon hearing of their customers becoming insolvent, the supplier credited the invoices, rather than waiting for the 6 months had expired under the bad debt relief rules (Reg 165A).
The FTT also upheld a decision that to credit the invoices rather than use bad debt relief was ‘deliberate,’ so a penalty of 35% was applied.
http://financeandtax.decisions.tribunals.gov.uk//Aspx/view.aspx?id=10749
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