VBDR2300 - Payments: How is the claim amount calculated?
The basis of a claim for bad debt relief is the VAT declared in respect of the amount outstanding when a claim is made. In the example in VBDR2200the bad debt relief entitlement would be:
184.14 + 587.50 = 771.64 x 7/47 = 114.93 (as the supplies are at the standard rate).
No relief is available for supply (03) as it is zero-rated.
Where the supply is at the reduced rate of 5%, the VAT fraction to be used in calculations is 1/21.
The Enderby Transport Limited (MAN/83/304) decision confirmed that the amount outstanding should be treated as a gross amount and relief is only available upon the VAT part of the debt. Although the VAT Act and supporting Regulations have changed since this case, this approach has been supported by later Tribunal decisions.