VAT bad-debt relief — claim back output VAT after 6 months

What it does

Under HMRC VAT Notice 700/18, once a sales invoice is at least 6 months overdue from its due_date and written off in your accounts, the output VAT you originally accounted for becomes recoverable as a Box 4 input-VAT adjustment on your next return.

Blankitt wires this up automatically. When you write off a specific provision, the engine checks eligibility — overdue by 6+ months, VAT scheme is standard or cash (flat-rate is excluded), invoice has non-zero VAT — and if it passes, it inserts a pending row in fin_vat_bad_debt_claims. The next VAT return calculator folds all pending claims into Box 4. On a successful HMRC submission the claims flip to claimed with the return_id stamped against them.

The Bad debts page has a VAT relief card showing the pending count, the value waiting to be claimed, and your lifetime total recovered.

How to use it

1. Raise the specific provision as normal (see Create a specific bad-debt provision). No special toggle — VAT relief is opt-out, not opt-in.
2. When the debt is genuinely uncollectable, click Write off on the provision card. The engine evaluates the 6-month rule against the original invoice's due_date.
3. If eligible, you'll see a green "VAT relief queued — £X.XX" banner on the write-off confirmation. The pending claim row is inserted in the background.
4. Open Bad debts to see the new claim listed under VAT relief → Pending.
5. Next time you file your VAT return (see Submit a VAT return via MTD), the Box 4 figure automatically includes the queued claims. The return preview itemises them so you can sense-check.
6. On successful HMRC submission, the claims flip to claimed. The relief card updates and the lifetime total ticks up.

Tips

• Flat-rate scheme is ineligible. HMRC doesn't let flat-rate traders claim under 700/18 because Box 4 is fixed by the flat-rate percentage, not your actual input VAT. Blankitt skips the claim entirely if your scheme is flat_rate.
• The 6 months is counted from due_date, not issue_date. A 60-day-terms invoice issued today is eligible 8 months from now, not 6.
• If the customer later pays, a sibling negative-amount claim is raised automatically on the recover-provision path so your next return reverses the Box 4 boost. This repayment is mandatory under 700/18 — don't disable it.
• Partial write-offs prorate the VAT. Writing off 60% of a £1,200 invoice claims back 60% of the £200 VAT, not all of it.
• The full claim history (pending, claimed, reversed) is on the Manage modal for audit.

Related

• Create a specific bad-debt provision
• Configure the General Provision policy
• Submit a VAT return via MTD