Andrew Needham looks at how to get the best from a bad debt relief claim.
The basics of claiming bad debt relief (BDR) are that when an invoice has remained unpaid, or partly unpaid, for six months after the due date for payment, it is possible to claim BDR on the outstanding amount from HMRC on the VAT return covering the period when the BDR becomes eligible for claim. If the debt is eventually paid, the business must pay back the VAT to HMRC on the next VAT return after receiving the payment.
However, there can be some twists to claiming BDR that businesses should be aware of, to make sure they get the full amount and do not fall foul of HMRC.
Flat rate scheme
There is a welcome ‘loophole’ in the flat rate scheme (FRS) for small businesses that allows a small benefit when using the cash basis.
The cash basis of the
