Revenue and Customs Brief 1 (2017): VAT - historical bad debt relief claims

Revenue and Customs Brief 1 (2017): VAT - historical..

HMRC have released a Brief following the end of the litigation in the GMAC UK Plc case concerning the UK’s historic Bad Debt Relief rules.


Also on

HMRC have released a Brief following the end of the litigation in the GMAC UK plc case concerning the UK’s historic Bad Debt Relief rules. As expected, the Brief confirms that claims in relation to supplies pre-1 April 1989 will be refused. Claims relating to supplies of goods made between 1 April 1989 and 19 March 1997 will be paid subject to ‘satisfactory evidence that the bad debts occurred and that the VAT hasn’t been previously reclaimed’. The reason for the VAT on the bad debt not being previously claimed would be that the goods had been supplied subject to a retention of title condition, often referred to as a Romalpa clause.

In terms of evidence, the Brief states that the Bad Debt Notice 700/18 at the time stated that bad debt relief would have applied, because title would have passed, where either of the following occurred:

  • The goods in question had been sold on to a third party by the debtor; or
  • a supplier chose to write to their customer and give up title in the goods to them.

The Brief goes on to add that it is therefore possible that businesses may have previously claimed relief during this period under these terms. The Brief considers that this is unlikely to be the case in circumstances where businesses routinely repossessed high value goods following default by the customer. The Brief adds that it is more likely that VAT bad debt relief may have been claimed where, for example, goods were supplied to customers who purchased the goods for resale.

The Brief states that to ensure businesses have not previously claimed relief, claims will need to meet the requirements set out in conditions 1 to 5 in paragraph 2.2 of Notice 700/18.

Failing this, the Brief says businesses will need to satisfy HMRC by other means that they did not previously obtain bad debt relief. HMRC will consider alternative evidence for amount and methodology. The responsibility is on the claimant to show:

  • that they suffered bad debts on supplies of goods made under retention of title terms;
  • they didn’t previously claim relief; and
  • the amount claimed is correct.

The Brief finishes by confirming existing claims will be dealt with in line with the Brief and invites new claims with full supporting evidence.


For further information please contact :

Trevor Lewis

Tax Matters Digest

View KPMG's weekly newsletter covering the latest issues in taxation and government announcements relating to tax matters.

Read more

Connect with us


Request for proposal



KPMG’s new-look website

KPMG has launched a state of the art digital platform that enhances your experience and provides improved access to our content and our people, whatever device you are on.