The VAT briefing for September 2012

Bad debt relief: GMAC

In GMAC v HMRC [2012] UKUT 279 (TCC) the Upper Tribunal (UT) considered the compatibility with EU law of the UK’s historic regime for VAT relief on bad debts in the context of hire-purchase (HP) agreements for cars.

Article 11C(1) of the Sixth VAT Directive (now Article 90 of the Principal VAT Directive) provided that in the case of total or partial non-payment of the consideration for a supply the taxable amount was reduced under conditions determined by States although States could derogate from this rule. The UK implemented this in VATA 1983 s 22 which entitled a taxpayer to claim a refund of VAT accounted for on a supply to the extent the consideration was not paid (bad debt relief or BDR). However BDR was not available in...