Jeremiah is a VAT registered sole trader making only standard rated supplies. Jeremiah's normal credit terms require payment within 60 days of the invoice date. At 31 December 2024 the following debts are unpaid: Invoice date Customer 1 April 2024 1 October 2024 Paul Cello Ltd VAT amount £ 500 2,000 Output tax on both of these has been accounted for and paid to HMRC. The debt from Cello Ltd has been written off in the accounts but the one relating to Paul has not, as it is believed that Paul will pay within the next two weeks How much VAT bad debt relief can Jeremiah claim in the VAT return for the quarter to 31 December 2024? O A Nil O B. £500 O C. £2.000 O D. £2,500 what is the final answer?
In the UK, VAT bad debt relief can be claimed when a debt is more than six months overdue and has been written off in the trader's accounts. The relief allows the trader to reclaim the VAT that was paid to HMRC on the unpaid invoice. Let's analyze the situation: 1. **Paul's Debt**: - Invoice date: 1 April 2024 - As of 31 December 2024, this debt is more than six months overdue. - However, it has not been written off in the accounts because it is believed that Paul will pay soon. 2. **Cello Ltd's Debt**: - Invoice date: 1 October 2024 - As of 31 December 2024, this debt is not more than six months overdue. - However, it has been written off in the accounts. For VAT bad debt relief, the debt must be both more than six months overdue and written off in the accounts. In this case, neither debt meets both criteria: - Paul's debt is overdue but not written off. - Cello Ltd's debt is written off but not overdue by more than six months. Therefore, Jeremiah cannot claim any VAT bad debt relief for the quarter to 31 December 2024. The correct answer is **A. Nil**.
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