Bad debt relief claim rejected

In 2014 the taxpayer claimed historic bad debt relief on VAT on supplies in the period 1 April 1989 to 18 March 1997. HMRC rejected the claim which stood at about £9.9m. The First-tier Tribunal dismissed the taxpayer’s appeal on the basis that there was no evidence to show the taxpayer had not made previous claims for the periods when the records had been destroyed.

The taxpayer appealed to the Upper Tribunal.

First the taxpayer said the First-tier Tribunal had misinterpreted the guidance in VAT Notice 700/18. The Upper Tribunal disagreed saying the words ‘the goods have not been passed on with good title to a third party’ could apply to the situation where title passes through incorporation of the goods.

The judges also rejected the taxpayer’s argument that the lower tribunal was wrong to infer from the availability of the incorporation route of passing of title...