# VAT bad debt relief: wait six months, claim within 4 years and 6 months, worked for a £7,200 invoice part-paid

> A client can reclaim VAT on an unpaid invoice six months after it was due, and within 4 years and 6 months. Worked on a £7,200 invoice with £2,400 paid.

- Page to cite: https://aeolookup.com/accountants/vat-bad-debt-relief-six-months-4-years-6-months-box-4-unpaid-invoice-client-worked/
- Publisher: AEO Lookup (https://aeolookup.com/)
- Section: Accountancy practices, Deadlines and penalties
- Published 14 October 2026
- Key fact: An invoice of £6,000 plus £1,200 VAT, £7,200 in all, supplied 1 March 2026 and due 15 March 2026. The later date is 15 March, so the claim opens on 15 September 2026 and closes on 15 September 2030. If £2,400 was paid, £4,800 is unpaid, and VAT is one sixth of a gross figure at 20%, so the claim is £800. With nothing paid the claim is the full £1,200.
- Sources: GOV.UK, "VAT Notice 700/18: relief from VAT on bad debts" (wait at least 6 months from the later of the date payment was due and the date of supply; claim within 4 years and 6 months of the later of those dates; VAT must have been accounted for and paid to HMRC; debt written off in the day-to-day VAT accounts and moved to a bad debt account; value not above the customary selling price; not paid, sold or factored; claim on the return for the period in which the conditions are first met, in box 4; records kept for 4 years from the claim; payments go to the earliest supply first unless the customer names one and pays it in full; relief only on the unpaid portion). Read 14 October 2026.

A client invoiced a customer in March and the customer has gone quiet. The client has already put the VAT on that invoice through a return and paid it to HMRC, so they are out of pocket for the net sum and the tax. The question the practice gets is when the VAT can come back, and by when it must be claimed. This guide sets out the two dates, the part-payment rule and the claim itself.

## What GOV.UK says

I read the HMRC notice on bad debt relief on GOV.UK today. The points that matter:

- **The wait.** You must wait "at least 6 months from the later of" the date payment was due and the date of supply before claiming.
- **The limit.** For supplies after 30 April 1997, "you must claim within 4 years and 6 months of the later of" those two dates.
- **The conditions.** The VAT must already be accounted for and paid to HMRC. The debt must be written off in the client's day-to-day VAT accounts and moved to a separate bad debt account. The value of the supply must not exceed the customary selling price, and the debt must not have been paid, sold or factored under a valid legal assignment.
- **The claim.** It goes on the VAT Return for the period in which the conditions are first met. It cannot go on an earlier period's return. The amount is included in box 4.

## The dates on one invoice

| Item | Figure |
|---|---|
| Net | £6,000 |
| VAT at 20% | £1,200 |
| Gross | £7,200 |
| Date of supply | 1 March 2026 |
| Payment due | 15 March 2026 |
| Later of the two | 15 March 2026 |
| Earliest claim | 15 September 2026 |
| Last claim | 15 September 2030 |

The later date is what counts. If the invoice was raised on 1 March with terms of 30 days, payment was due on 31 March and the six months run from 31 March, not from the supply date. A practice that counts from the invoice date will claim too early.

## Part payments

GOV.UK says payments go to the earliest supply first, unless the customer names a particular supply and pays it in full. Relief covers only the unpaid portion: "you can only claim a refund on the VAT relating to the amount that is still unpaid."

Our arithmetic. Say the customer paid £2,400 against this invoice. The unpaid gross is £4,800. At a 20% rate, VAT is one sixth of a gross figure, so the VAT in the unpaid part is £4,800 divided by 6, which is £800. The box 4 claim is £800. With nothing paid it would be £1,200.

## What to keep

Keep copies of the VAT invoices, or an equivalent document, and a separate bad debt account showing the amount written off, the VAT claimed, the customer's name and the invoice date and number. GOV.UK gives the retention as 4 years from the date of the claim, which is separate from the usual six-year period.

## A short check per client

1. Which return paid the VAT on the invoice? Relief needs it paid to HMRC.
2. What was the later of the due date and the supply date?
3. Is it at least six months on, and under 4 years and 6 months?
4. Has anything been paid, and which supply did the customer name?
5. Is the debt written off in the client's accounts and in the bad debt account?

For the penalty side of a client's VAT, see [which penalty applies to a late return or payment](https://aeolookup.com/accountants/which-penalty-applies-late-return-late-payment-self-assessment-vat-accounts/). For a client near the registration line, see [VAT registration at £90,000](https://aeolookup.com/accountants/vat-registration-90000-threshold-30-day-rule-accountants/) and, on the way out, [cancelling VAT registration](https://aeolookup.com/accountants/cancel-vat-registration-88000-stock-and-assets-1000-rule/).

I did not read the rules for retail schemes, for a debt that is later paid after relief was claimed, or for clients on the Flat Rate Scheme, so check the full notice for those.

Overlyft ![](https://aeolookup.com/img/d/ours-badge.png) builds AI staff who join your practice team and list each client's sales invoices still unpaid, work out the six-month and 4 years and 6 months dates from the later of due date and supply date, and put the claims that are due in front of you before the return is filed.

This is general information, not tax advice. Check GOV.UK and the client's own figures before you advise.

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Overlyft: https://overlyft.com/

General information for UK small firms, not legal, tax or financial advice.