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VAT Bad Debt Relief Calculator: When Can You Claim VAT Back on an Unpaid Invoice?

Last reviewed 28 September 2026. Based on HMRC’s VAT Notice 700/18 and the VAT Regulations 1995.

If a customer never pays you, you can claim back the VAT you already paid HMRC on that sale. The debt must be at least 6 months overdue, counted from the later of the date payment was due and the date of the supply, and you must claim within 4 years and 6 months of that same date. Enter the invoice details below to see your claim window and how much VAT you can recover.

The two dates that matter

Everything hangs off one starting point: whichever is later of the date payment was due and the date of the supply. For most invoices that is simply the payment due date. From there:

HMRC’s own worked example counts to the same calendar date six months later, and the calculator does the same. Where the later month is shorter, such as a due date of 31 March, it uses the last day of the month, 30 September. If you want to be extra cautious, claim a day later.

The “date of supply” means the tax point, which is not always the invoice date. If you raised a pro forma request for payment before delivering, the pro forma does not create a tax point, so the supply date is when you delivered. If you issued a proper VAT invoice in advance, that invoice date is the tax point.

Conditions for claiming

You can only claim if all of these are true:

• You have already accounted for the VAT on the sale and paid it to HMRC.
• You have written the debt off in your accounts and recorded it in a separate bad debt account, which HMRC calls the refunds for bad debts account.
• The price was not more than your normal selling price.
• The debt has not been paid, sold or factored to someone else under a legal assignment.
• At least 6 months have passed since the later of the due date and the supply date.

How to claim on your VAT return

1. Write the debt off. Record it in your bad debt account on or after the earliest claim date.
2. Work out the VAT. At 20%, the VAT is one sixth of the unpaid amount. At 5%, it is one twenty first. If £1,200 including VAT is unpaid, you claim £200.
3. Add it to box 4 of the VAT return for the period in which you became entitled, or any later return within the time limit. Do not reduce box 1.
4. Keep the records for at least 4 years from the claim: a copy of the invoice, when you accounted for the VAT, the amount written off, any payments received, and the customer’s name.

If your VAT registration has been cancelled, you claim on form VAT427 instead of a return. Our guide on how to do a VAT return explains each box.

Part payments and mixed invoices

You only claim VAT on the part that is still unpaid. If the customer paid £600 of a £1,200 invoice, you claim one sixth of the remaining £600, which is £100.

When a customer owes you on several invoices and pays some of it, HMRC expects the payment to be set against the oldest invoice first, unless the customer says the payment is for a specific invoice and pays that one in full. That order also sorts out invoices with standard rated, zero rated and exempt items on them. If you sold under a margin scheme, relief is limited to the VAT on your margin.

If the customer pays later

If money arrives after you have claimed, you pay back the matching share of the relief. Put it in box 1 of the return for the period you receive the payment. The share is the relief claimed multiplied by the payment received, divided by the amount that was outstanding when you claimed.

Relief to repay=relief claimed ×payment receivedamount outstanding when you claimed

Relief under the VAT schemes

Not sure the Flat Rate Scheme suits you? Our flat rate VAT calculator compares it with standard accounting.

What your customer has to do

If your customer is VAT registered and reclaimed the VAT on your invoice, they have to pay it back to HMRC if they still have not paid you 6 months after the later of the supply and due dates. They do this by reducing box 4 on their return, whether or not you claim relief. If they later pay you, they can reclaim it again. This does not apply if an insolvency procedure started before the 6 months ran out and HMRC was told in writing.

Special situations

• Customer goes insolvent. You can still claim bad debt relief in the normal way. If you later receive a dividend from the insolvency, repay the matching share of the relief.
• Factored debts. No relief while the debt belongs to a factor under an absolute assignment. You can claim once it is assigned back to you.
• Credit notes. Do not issue a credit note just because a customer has not paid. Credit notes are only for genuine mistakes, overcharges or agreed price reductions.
• Selling your business. Normally only the business that made the sale can claim. A buyer who takes over the seller’s VAT number can claim on the seller’s old debts.

Frequently asked questions

Need to check the VAT on an invoice? Use our invoice VAT calculator or the main VAT calculator.

Sources: HMRC, VAT Notice 700/18; The Value Added Tax Regulations 1995, Part XIX; GOV.UK, late commercial payments. This page is general information, not tax advice.