VBDR1300 - Introduction: Law and regulations
Article 90 of the EU Principal VAT Directive, which is applicalble in Northren Ireland, says ‘In the case of cancellation, refusal or total or partial nonpayment, or where the price is reduced after the supply take place, the taxable amount shall be reduced accordingly under conditions which shall be determined by the Member States’.
Article 185 (1) & (2) fo the Principle VAT Directive allows member States [and Northern Ireland] to require adjustment (of VAT initially deducted) in cases of transactions remaining totally or partially unpaid.
VAT Act 1994, section 36 sets out the general conditions for bad debt relief, supplemented by the VAT Regulations 1995 (regulations 165 - 172). Any references to regulations throughout this guidance should be taken to mean the VAT Regulations 1995 unless otherwise specified.
VAT Act 1994, schedule 13, paragraph 9(2) provides that claims can be made under the current section 36 (and supporting regulations) where the supply concerned was made on or after 1 April 1989 and no claim has been made under the old scheme. Effectively the only supplies for which claims could have been made under either scheme are those between 1 April 1989 and 26 July 1990. From 27 July 1990 claims have only been possible under the current scheme.
Article 184 of the Principal VAT Directive allows Member States to require adjustment (of VAT initially deducted) in cases of transactions remaining totally or partially unpaid.
VAT Act 1994, section 26A requires businesses to repay input tax recovered on supplies made to them on or after 1 January 2003 where the supply has not been paid for within 6 months of the date of the supply, or due date for payment if later.