Solution Properties
Solution ID:
260820141359433
Last Modified Date:
Mon Aug 24 12:10:55 UTC 2026
Taxonomy Path:
Case category//How do I...//processing
Author:
[email protected]
Reclaim the VAT from a bad debt invoice
Description

Reclaim VAT on bad debts

If you use the Standard VAT Scheme, you may be able to reclaim the VAT you’ve already paid to HMRC.

You can't reclaim VAT if you use the VAT Cash Accounting Scheme as you only pay VAT when the customer pays their invoice. Since the customer hasn’t paid you, there’s no VAT to reclaim.

Bad debt relief conditions

To reclaim VAT when using the Standard VAT Scheme, you must meet certain conditions, such as

  • The VAT on the outstanding invoice appears on a VAT Return and you have paid HMRC
  • You've written off the debt in your accounts and transferred it to a separate bad debt account. You do this when you create the credit note
  • The debt is more than six months old but less than four years and six months old

For more information about these conditions and if you can reclaim bad debt, contact HMRC. For more information, visit their website GOV.UK.

NOTE:

Before reclaiming the VAT, you need to write of the sales invoice as bad debt.

 

Cause
Resolution

To reclaim VAT, you need to record a journal for the VAT amount.

This reduces your VAT liability on your next VAT return.

  1. From Adjustments, choose Journals, then New Journal.
  2. Enter the details such as the reference and the date.

  3. Add the following lines:

    Ledger Account Debit Credit Include on VAT Return?
    Bad Debts (8100) 0.00 Reclaim value Leave clear
    VAT on Purchases (2201) Reclaim value 0.00 Select the check box
  4. If required, add any additional details to the Description field.
  5. Select Save.
Steps to duplicate
Related Solutions