A challenge to HM Revenue & Customs (HMRC) regarding claims
for bad debt relief on VAT only invoices could lead to a
significant and beneficial change in the regulations, according to
chartered accountants Clement Keys.
The Upper Tribunal (Tax & Chancery Chamber) has challenged
the longstanding view that claims for bad debt relief should be
limited to the unpaid proportion of the whole VAT invoice.
"The recent Upper Tribunal's decision in the Simpson &
Marwick case could reverse that position, which would be good news
for businesses seeking to reclaim bad debt relief on VAT only
invoices," says Clement Keys Director of VAT Services Steven
Simmonds.
Clement Keys believes the Upper Tribunal's findings will not
apply to all businesses, as few businesses issue separate net and
VAT only invoices, but Mr Simmonds says it can happen when a
business is late registering for VAT and raises VAT only invoices
for supplies made between the date of registration and the date
HMRC issues their VAT number.
It may also be relevant for some legal practices, garages and
other businesses involved in insurance related work.
"Businesses which have suffered non-payment of VAT only
invoices, and have limited their bad debt relief claims to the
relevant VAT fraction, should therefore consider submitting
protective claims pending an announcement from HMRC," adds Mr
Simmonds.