Claim VAT on outstanding Debts

Businesses using the Flat Rate VAT Scheme may be able to claim VAT windfalls on outstanding business debt!

Accountants Liverpool - Claim VAT on outstanding Debts

This claim can be made regardless of when the business provided the initial sale on your VAT return as it accounts for FRS tax when it receives payment from customer rather than the invoice date received


Ian builds websites and uses the flat rate scheme. His flat rate percentage is 10% and he provides for VAT upon receiving final payment from his clients. However one of his major clients go under before paying owing his company £4,000 + VAT.

Providing the debts are older than 6 months and the debts have been written off in his accounts he can then claim the VAT windfall of £380.

How is this worked out?

VAT is 20% of £4,000 = £800

£4,800 x his Relevant Flat Rate percentage 10% = £480

VAT – Relevant Flat Rate percentage = £380

Hence the business needs to be compensated for the VAT loss of £380

Reference – HMRC Notice 733, section 14