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What are the conditions required to claim VAT relief on bad debts?

A business can recover VAT paid to HMRC on supplies of goods and services if the customer has not paid and the following conditions are satisfied:

1. •

   the business must have charged VAT at either the standard or reduced rate

2. •

   the VAT charged must have been accounted for to HMRC

3. •

   the VAT amount must have been written off in the VAT accounts and have been transferred to a special VAT bad debt account

4. •

   the value of the supply must not exceed ‘open market value’

5. •

   the debt must not have been transferred, sold or factored under a