§ Mr. SheermanTo ask the Chancellor of the Exchequer in what circumstances he(a) is able to allow and (b) is obliged to disallow claims for deductions for value added tax purposes where expenditure has been incurred but not paid. [6207]
§ Mr. OppenheimThe right of businesses to claim deduction of value added tax is in general based on the principle of supplies received rather than on payments made. However, the cash accounting scheme allows businesses with a turnover of not more than £350,000 a year to opt to deduct VAT in the period when payment for supplies is made.
The Chancellor announced a new measure on this issue in his Budget: the VAT bad debt relief scheme has been changed so that non-payers will be required to repay any input tax which they have previously claimed from Customs and Excise. This change, which will apply to supplies made after 26 November 1996 which the customer has not paid for and for which the supplier has claimed bad debt relief, should help to encourage faster payment of debts.