Section 36 Bad debts
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(1) Subsection (2) below applies where—
(a) a person has supplied goods or services ...1 and has accounted for and paid VAT on the supply,
(b) the whole or any part of the consideration for the supply has been written off in his accounts as a bad debt, and
(c) a period of 6 months (beginning with the date of the supply) has elapsed.
Amendments
1 The words “for a consideration in money” omitted by Finance Act 1998 section 23(1) and repealed by section 165(1) and Schedule 27 Part II in relation to claims made on or after 31 July 1998.
(2) Subject to the following provisions of this section and to regulations under it the person shall be entitled, on making a claim to the Commissioners, to a refund of the amount of VAT chargeable by reference to the outstanding amount.
(3) In subsection (2) above “the outstanding amount” means—
(a) if at the time of the claim no part of the consideration written off in the claimant’s accounts as a bad debt has been received, an amount equal to the amount of the consideration so written off;
(b) if at that time any part of the consideration so written off has been received, an amount by which that part is exceeded by the amount of the consideration written off;
and in this subsection “received” means received either by the claimant or by a person to whom has been assigned a right to receive the whole or any part of the consideration written off.
Amendments
Subs (3) substituted by Finance Act 1999 section 15(1) for the purposes of the making of any refund or repayment after 9 March 1999.
(3A) For the purposes of this section, where the whole or any part of the consideration for the supply does not consist of money, the amount in money that shall be taken to represent any non-monetary part of the consideration shall be so much of the amount made up of—
(a) the value of the supply, and
(b) the VAT charged on the supply,
as is attributable to the non-monetary consideration in question.
Amendments
Subs (3A) inserted by Finance Act 1998 section 23(3) in relation to claims made on or after 31 July 1998.
(4) A person shall not be entitled to a refund under subsection (2) above unless—
(a) the value of the supply is equal to or less than its open market value, ...1
(b) ...2
Amendments
1 The word “and” repealed by Finance Act 1997 section 113 and Schedule 18 Part IV(3) in relation to supplies made on or after 19 March 1997.
2 Para (b) omitted by Finance Act 1997 section 39(1) and repealed by section 113 and Schedule 18 Part IV(3) in relation to supplies made on or after 19 March 1997.
(4A) ...
Amendments
Subs (4A) omitted by Finance Act 2002 section 22(2) and repealed by section 141 and Schedule 40 Part 2(1) in relation to supplies made on or after 1 January 2003.
(5) Regulations under this section may—
(a) require a claim to be made at such time and in such form and manner as may be specified by or under the regulations;
(b) require a claim to be evidenced and quantified by reference to such records and other documents as may be so specified;
(c) require the claimant to keep, for such period and in such form and manner as may be so specified, those records and documents and a record of such information relating to the claim and to [anything subsequently received]1 by way of consideration as may be so specified;
(d) require the repayment of a refund allowed under this section where any requirement of the regulations is not complied with;
(e) require the repayment of the whole or, as the case may be, an appropriate part of a refund allowed under this section [where any part (or further part) of the consideration written off in the claimant’s accounts as a bad debt is subsequently received either by the claimant or, except in such circumstances as may be prescribed, by a person to whom has been assigned a right to receive the whole or any part of that consideration;]2
(ea) ...3
(f) include such supplementary, incidental, consequential or transitional provisions as appear to the Commissioners to be necessary or expedient for the purposes of this section;
(g) make different provision for different circumstances.
Amendments
1 Substituted for the words “subsequent payments” by Finance Act 1998 section 23(4)(a) in relation to claims made on or after 19 March 1997.
2 Substituted by Finance Act 1999 section 15(2) for the purposes of making of any refund or repayment after 9 March 1999.
3 Para (ea) omitted by Finance Act 2002 section 22(2) and repealed by section 141 and Schedule 40 Part 2(1) in relation to supplies made on or after 1 January 2003.
(6) The provisions which may be included in regulations by virtue of subsection (5)(f) above may include rules for ascertaining—
(a) whether, when and to what extent consideration is to be taken to have been written off in accounts as a bad debt;
(b) whether [anything received]1 is to be taken as received by way of consideration for a particular supply;
(c) whether, and to what extent, [anything received]1 is to be taken as received by way of consideration written off in accounts as a bad debt.
Amendments
1 Substituted for the words “a payment” by Finance Act 1998 section 23(5) in relation to claims made on or after 31 July 1998.
(7) The provisions which may be included in regulations by virtue of subsection (5)(f) above may include rules dealing with particular cases, such as those involving [receipt of part of the consideration]1 or mutual debts; and in particular such rules may vary the way in which the following amounts are to be calculated—
(a) the outstanding amount mentioned in subsection (2) above, and
(b) the amount of any repayment where a refund has been allowed under this section.
Amendments
1 Substituted for the words “part payment” by Finance Act 1998 section 23(6) in relation to claims made on or after 31 July 1998.
(8) Section 6 shall apply for determining the time when a supply is to be treated as taking place for the purposes of construing this section.
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