In Saint-Gobain Building Distribution Limited v HMRC [2021] UKUT 75 the Upper Tribunal (UT) ruled that a historical bad debt relief claim could not be made due to lack of supporting evidence. There was no proof that relief had not already been claimed.

Saint-Gobain had brought other companies into its VAT Group.

  • In 2014, it claimed historic Bad Debt Relief (BDR) on VAT on building material supplies for periods between 1989 and 1997 on behalf of those companies.
  • The basis of the claim was that the acquired companies had failed to do so, due to retention of title clauses.

HMRC rejected the claim which stood at £9.9 million arguing that BDR claims could have been made by the previous companies.

  • The burden of proof was on Saint-Gobain to demonstrate that claims had not already been made. This was not easy given that the claims related to debtors from over three decades before they were submitted and the VAT records had long since been destroyed. 
  • Saint-Gobain argued that the goods had been sold subject to a retention of title clause, so a BDR claim could not have been successfully made . VAT law and HMRC’s guidance on Bad Debt Relief at the time stipulated that relief was not available where retention of title clauses was present in contracts.
  • HMRC counter-argued that property in the goods had passed to customers when the goods were incorporated into the customers’ building projects so that it was likely that BDR claims had been made, and even if they had not, they could have been made.

The First Tier Tribunal (FTT) dismissed Saint-Gobain’s appeal, on the basis that there was no evidence to show that previous claims for the periods had not been made. The FTT also commented that where building materials had been incorporated into various buildings, the retention of title clauses was rendered irrelevant.

The UT agreed with the FTT's conclusion that Saint-Gobain failed to prove on the balance of probabilities that BDR had not been claimed in the earlier VAT periods.

The appeal was dismissed.


This case further emphasises that where goods are incorporated into buildings, retention of title clauses are not always effective where legal title is transferred to customers. Adequate and robust evidence is essential in any Bad Debt Relief claim.

Useful guides on this topic   

Bad debts: VAT recovery
When can you recover VAT on a bad debt? How much VAT is payable to HMRC or recoverable from HMRC when only part of an invoice is paid? 

Reclaims and unjust enrichment
When can VAT reclaims be made? What are the time limits? What is unjust enrichment? Why might unjust enrichment prevent HMRC making VAT repayments? 

External links

UT: Saint-Gobain Building Distribution Limited v HMRC [2021] UKUT 75

FTT: Saint-Gobain Building Distribution Limited v HMRC [2019] TC07142

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