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Was bad debt relief available on historic bad debts?

By Andrew Needham, May 2021

This was an appeal against the decision of the First-tier Tribunal (FTT) that dismissed the appellant’s claim for historic bad debt relief (BDR) for £9.9 million on VAT on supplies for the period 1 April 1989 to 18 March 1997 that was made in 2014.

The key issue before the FTT was whether the appellant could show that it had not already made BDR claims for those supplies before, in circumstances where the VAT records relating to the relevant period of claim had long since been destroyed. The FTT was not satisfied that the appellant could show that the BDR claims had not already been made before.

The FTT had analysed the case law on the approach to be taken and concluded that the taxpayer bore the burden of proving, on the balance of probabilities: 1) that there were historical bad debts; 2) that BDR had not previously been claimed thereon; and 3) that the amount of the claim could now be reasonably and sustainably estimated or approximated

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