VAT Rules on Bad Debts Simplified

Proposal to simplify refunding VAT on bad debts

The Finance Secretary has proposed simplifying the refund of VAT on bad debts by the 1st January 2017.
The right to reimbursement arises when the payment has not been received by your organisation one year after it was due, fully or in part.

If an invoice is issued with a payment date of the 8th September 2016, and the bill is not paid on the 8th September 2017, the VAT on bad debts can already be reclaimed.
Another change is that it will be your organisation itself that then deducts the refund on the regular VAT return for the period in which it is clear that the debtor will not pay. The organisation will not need to do an application for refund of VAT on bad debts by letter for this purpose.
If later on, your organisation then receives the outstanding amount fully or in part, the VAT then has to be (partly) paid to the tax authorities.

Faster & easier
This proposed amendment will most likely result in a faster and easier way for your organisation to recover the VAT on bad debts in the future.

Do you want to learn more about your particular situation and your tax matters?

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