Build the evidence for a UK VAT bad-debt relief review

UK VAT bad-debt relief has conditions beyond an invoice appearing in the oldest aging bucket. Establish that the VAT was accounted for and paid. HMRC requires the debt to be written off in day-to-day VAT accounts and transferred to a separate bad-debt account; the timing and other eligibility conditions also apply. Businesses using cash accounting generally do not need this relief because VAT follows receipts.

Create a candidate list from the receivables ledger, but keep it separate from the approved claim register. A credit-control employee can identify a problem without deciding the tax treatment. Give the VAT preparer the invoice, payment history, contract terms, and write-off approval as one connected file.

HMRC's six-month condition runs from the later of the supply date and the date payment became due and payable. There is also a claim time limit. Ask the reviewer to confirm both dates and the applicable claim deadline; do not calculate eligibility solely from the age shown by the accounting software.

Separate a disputed price from an unpaid agreed price. Record any revised payment terms, credit notes, installment arrangements, or settlement agreement. An employee may have changed the software due date to manage collections without changing the customer's legal payment obligation. Preserve the underlying correspondence so the preparer can assess the actual position.

Start with the original supply and trace receipts, credits, and write-offs by invoice. Keep the VAT rate or rates visible. Do not apply the current standard rate to every outstanding balance, especially where an account contains differently taxed supplies or later adjustments.

Identify factoring, assignment, security, guarantees, and payments from other parties. These facts can affect the review. Route unusual arrangements to the adviser with their contracts attached instead of treating the customer ledger as complete evidence of the amount recoverable.

An illustrative debtor account might show £2,400 unpaid across two invoices while a £600 receipt sits unapplied. Before assessing relief, resolve what that payment covers. Moving the receipt into a suspense account does not make it disappear from the tax analysis, and guessing its allocation can distort both the claim and future collection records.

The required bad-debt records include the invoice details, amount written off, VAT claimed, relevant VAT periods, and payments received. Link the approved claim to the return on which it was made. Keep the original evidence accessible even if the accounting system later hides written-off customer balances.

Review the candidate list for duplicates before submission. If the same debt appears in a collections spreadsheet and a legal recovery list, retain one claim reference with links to both supporting files. Reconcile the approved register to the return entry and record who checked that bridge.

A later customer payment can require repayment of the VAT element through box 1 for the receipt period. Preserve the receipt against the original relief claim so the preparer can calculate the required adjustment. Tell collections staff which written-off invoices have VAT relief attached, and include those receipts in the return review even when the cash is welcome and the customer dispute is finally closed.