My recommendation is that you adopt a pedantic approach when applying VAT procedures. The devil’s in the detail of every VAT relief so it’s important to make sure procedures are secure to protect against a challenge from HMRC. There are lots of VAT procedural man traps out there including international trade, invoicing procedures, any relief especially involving certification and Bad Debt Relief (BDR).
While it’s old news that you can claim VAT back on unpaid sales invoices when their six months old under the BDR rules, what is new is a tribunal decision testing whether the conditions for a claim have been met. This is worth thinking about as otherwise BDR claims could be easy pickings for HMRC.
Gladstone F1 Ltd claimed VAT back under BDR but unfortunately were late making the claim. Instead of having an ongoing process to monitor aged debtors, Gladstone tried to claim back one lump sum but outside the four-year cap. The argument hinged on whether Gladstone had written off the debts, which is a prerequisite for making a BDR claim. They had a list of debts and had made a Bad Debt provision however they didn’t have a BDR memo account to which they posted the debts and it was for this reason that Gladstone lost their argument.
Tighter procedures that pedantically apply the rules would have avoided this problem. Lots of other problems suffer from the same root cause and are allowed to happen by VAT not being properly addressed in advance.