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Regency provided factoring services. After the client has assigned invoices to it the taxpayer advanced funds to the client based on a proportion of the amount of the invoices. Regency then collected the invoice value from the customers and any balance due is paid to the client. If it was unable to collect an amount either from a customer or the client it claimed bad debt relief (VATA 1994 s 36).
Regency claimed bad debt relief for the VAT element of the fees that were unpaid by its clients. HMRC refused saying the consideration for the supply was received by Regency when it made its initial advance so there was no bad debt to write off. In any event the taxpayer did not comply with the requirements of the VAT Regulations SI 1995/2518 reg 168.
The First-tier Tribunal dismissed the appeal.
The Upper Tribunal said...
