Another EU ruling that HMRC is likely to approve of. An insurance company had a business insurance policy which enabled policy holders to claim on non-payments from their customers (i.e. bad debt). When a claim was made the policy holder’s contractual rights were re-assigned to the insurer. The insurer then tried to make bad debt relief (BDR) claims on these assigned debts. The EU court has ruled that BDR is not applicable here as the purpose of BDR is to ensure that the VAT declared by the supplier is aligned to the payment received. The insurer was not the supplier and the Court also ruled that to allow this would go against fiscal neutrality as the VAT received by the VAT authorities would not be the same as the VAT due on the original supply.
Source Rickard Luckin
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