Can I reclaim the VAT on an invoice that was never paid?
The short answer
Yes. If you paid HMRC the VAT on an invoice that is still unpaid six months after it fell due1, the VAT Act 1994 entitles you to a refund of that VAT2, called bad debt relief, once you have written the debt off. You claim it in Box 4 of your return within 4 years and 6 months1 of the later of the due date and the supply date. On cash accounting8 you did not pay it, so there is nothing to claim.
England and Wales only. WolfX is software, not a law firm.
What you can add
A £7,200 invoice, six months unpaid
Say you did the work for another business and invoiced it on 2 January 2026: £6,000 plus £1,200 VAT, with 30 days to pay. Payment fell due on 1 February 2026 and nothing has arrived. You put the £1,200 on that quarter's VAT Return and paid it to HMRC. The later of the two dates is the due date, 1 February 2026, and six months after it is 1 August 2026. You write the debt off in your accounts and claim on the return that covers that date, say your quarter to 30 September 2026.
That is £7,200.00 × 1/6, the VAT fraction at 20%, and it goes in Box 4 of the return that covers 1 August 2026. To be safe, treat 31 July 2030 as the last day to claim: 4 years and 6 months after the due date, less a day. The relief returns the VAT only, not the £6,000 sale.
The road ahead
Six steps. No fee to claim.
Step 1: Check it qualifies
Step 2: Count six months from the later date
The six months run from the later of the due date and the supply date1. The law agrees: section 36(1)(c)2 counts from the supply, and regulation 17211 says a debt can't count as written off until six months after it fell due.
Your credit terms set the due date: on 60-day terms the clock starts when the 60 days end. A longer period you agree with the customer sets it instead.
Step 3: Write it off and start the file
Once the six months are up, write the debt off in your accounts2 and move it to a separate bad debt account. HMRC's manual5 says it can't go in before then.
Keep that account and a copy of the invoice for 4 years from the day you claim1; the usual 6-year VAT rule still applies. Don't use a credit note instead: HMRC allows one only for a genuine mistake, an overcharge or an agreed reduction1.
Step 4: Work out the VAT
Take what is still unpaid, VAT included, and multiply it by 1/6 when VAT was charged at 20%1. If they paid part, claim only on the VAT in the unpaid part1.
A payment counts against your oldest invoice first1, unless the customer names an invoice and pays it in full.
On the Flat Rate Scheme you still claim. On the basic or retailer's turnover method you claim at the standard rate of VAT10, not your flat rate, so the 1/6 still applies. On the cash turnover method the sum is different: give section 14 of HMRC's notice to your accountant.
Step 6: If they pay, hand it back
Writing off is a book entry, and you can keep chasing. If money arrives, the rules make you hand back the VAT part of it1: put it in Box 1 of the return for the period it came in.
The VAT to hand back is your claim × the payment ÷ the unpaid amount. If they pay £3,600 of the £7,200, that is £1,200 × £3,600 ÷ £7,200 = £600.
A letter you can copy
Note to your accountant to write off a debt for VAT
Send it once an invoice is six months past its due date, in time for the VAT Return you want to claim on.
Tap a highlighted gap to see what goes in it.
Send it by email so it is dated, and keep a copy with the invoice. If the customer pays anything later, send your accountant the amount and the date the same day.
When not to bother
When it isn't worth it
- You use the Cash Accounting Scheme. You pay VAT when your customers pay you8, so you did not pay this VAT, and HMRC's notice says no relief is needed1.
- The six months are not up. There is nothing to claim yet. Put the date in your diary and keep chasing until then.
- The VAT is a few pounds. Each invoice needs its own entry in the bad debt account1, so on small sums the paperwork can cost more than the refund.
The Wolf's note
You owed HMRC the VAT on that invoice whether or not it was ever paid. You can take it back after six months, but the time limit to claim runs from the later of the due date and the supply date, not from the day you write the debt off. Put both dates on the file today.
Mr. Wolf · the AI inside WolfX
What comes next
Your next move
How do I write off an unpaid invoice in my accounts?
Only when you have decided it will not be paid and can show why.
6 min read · Letter included
Do I pay tax on an invoice that was never paid?
Yes, until you write it off, if you're a limited company or use traditional accounting.
5 min read
What you can add
Do I add VAT to late payment interest and compensation?
No. HMRC says no tax is due on interest because of late payment.
4 min read · Letter included
Don't want to do this yourself?
The Wolf does every step for you. He works out the sums, writes the letters and keeps track of every date. Nothing goes without your yes.