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Sam
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Im in construction, a client of mine has paid me £71000 he

Resolved Question:

I'm in construction, a client of mine has paid me £71'000 he still owes my company £51'000
The total for the job is £122'000 plus vat. He is refusing to pay the final bill, this is now in the process of judication.
I've already paid the vat on the £71'000 received, a total of £11'833 paid to the inland revenue, can I claim this amount back?
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.
Hi

Thanks for your question

My name is XXXXX XXXXX I am one of the UK tax experts here on Just Answer.

For both VAT and tax purposes you have to provide evidence of the fact you have attempted to pursue this debt.

I have added the link here - but basically -

When you can reclaim VAT on bad debts

You can reclaim VAT that you paid to HMRC and which you have not received from the customer. The conditions are that:
• the debt is more than six months old and less than four years and six months old
•you have written off the debt in your VAT accounts and transferred it to a separate bad debt account
•the debt has not been sold or handed to a factoring company
•you did not charge more than the normal selling price for the items

If you meet all this remit then you can claim the VAT you have paid over to HMRC.

Do read the other sections regarding part payment - in case any element relates to you, and the records you need to keep relating to this bad debt.

Thanks

Sam



Sam, Accountant
Category: Tax
Satisfied Customers: 13704
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
Sam and other Tax Specialists are ready to help you
Customer: replied 2 years ago.
If I write it off as a bad dept can I claim the vat paid on the £71'000 that was paid to me by this client?
Expert:  Sam replied 2 years ago.
Hi

Thanks for your response

No - as you had this money (the £71,000) and therefore the VAT is due to HMRC on this amount - and has been paid over correctly, you can just claim the VAT suffered on the element that was NOT paid to you, (which is the £51,000 of the £122,000) which you have declared to HMRC, and on which you have suffered the VAT - so the VAT in relation to the bad debt of £51,000

Thanks

Sam
Customer: replied 2 years ago.
Hi Sam
I only paid vat on the monies received from this client as I had a bad feeling about him (cash accounting) so I have not entered the sales invoice for the £51'000 in any vat period. So there is no vat due on the £51'000 as I have not paid any vat on this amount. Is that correct?
Regards Richard
Expert:  Sam replied 2 years ago.
Hi

Ahh I see - then no you cannot claim back what you have not yet suffered !

Then in essence you would should make sure OUR accounts show the dent as taken out, and placed as a bad debt - but for VAT purposes, under the cash accounting scheme, you have not paid anything over to HMRC so cannot claim so have nothing to claim back (although of course the VAT you suffered on the expenses spent - I assume has been fully claimed for, as this is permissible)

Thanks

Sam

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