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Hurndalls (TC3533)
The taxpayer was a firm of lawyers that provided services to a property developer.
The legal business raised contingent invoices for work on the understanding the client paid when it realised cash from a development.
The taxpayer did not account for VAT for invoices raised in 2002 and 2005 because they were not paid at a time in which the law firm dealt with its VAT on a cash accounting basis.
The business deregistered in 2006 and – as required by the 1995 VAT Regulations reg 63 – paid the tax in respect of the invoices from 2002 and 2005.
The taxpayer decided to write off the invoices in 2013 and claimed bad debt relief. HMRC refused on the basis reg 165A prevented the claim because it was out of time.
The taxpayer appealed.
The First-tier Tribunal noted that bad debt relief must be claimed by the later of...
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