VAT

[Kenben]

I took a debtor to Court for an unpaid invoice that he disputed. Shortly before the County Court appearance date he backed down and we came to an agreement that he would pay a significant sum (more than the original invoice but we'd each subsequently spent over £10k in legal fees) What is the VAT position on the amount he is now paying to me? Is it treated as Vattable or, since it has no relationship to the original sum. is it like a premium bond or lottery win and is not subject to VAT?
Thanks in anticipation

[maclarencat]

It does relate to the original sum as if the original sum had not been owed you would not have been receiving this money. The amount that relates to the original invoice should be treated the same way as if the invoice had been paid and therest offset against the legal costs so there is a vat implication

[maclarencat]

By the way it is definately not "like a premium bond or lottery win"

[DTCwordfan]

hope you have good documentation on all your expenses in pursuing this...