Q
Hi Marie
I’m sure this is an easy one for you, I just wanted to confirm that VAT bad debt relief for supplies at 17.5% is calculated as 7/47 of the amount owing but when the supply is at 15% it would be 3/23?
B
Yes AS, you are correct, you apply the “VAT fraction” to the VAT inclusive amount owed. So if someone has paid you £400 of a VAT inclusive bill of £900, you would calculate the VAT amount as 3/23 of the outstanding £500. If the debt relates to a supply at 17.5% VAT, the VAT is calculated at 7/47 of the VAT inclusive amount owing.
I’m sure you are aware of course that Bad Debt Relief can’t be claimed until at least 6 months after the date of the supply and only when the supplier has satified the other conditions set out in HMRC’s VAT Leaflet 700/18: Relief from VAT on Bad Debts.
Hope this clarifies the point
Marie