Bad debt VAT is added onto which type of VAT?

The correct answer is based on the understanding of how bad debt relief applies within the VAT system. Bad debt VAT is added to input VAT because it relates to the VAT a business is entitled to reclaim on purchases when the supplier has not received payment for a sale. When a business writes off a debt as uncollectable, it can claim back the VAT that it has paid on the input costs associated with those sales. This is essential for ensuring that the business does not suffer a double loss due to uncollectable debts.

In contrast, output VAT is the amount collected from customers on sales, and capital VAT pertains to VAT on capital goods. Flat rate VAT is a simplified scheme for small businesses and does not specifically involve bad debt recovery processes in the way input VAT does. Thus, examining the context of bad debt relief in relation to these different categories of VAT clarifies why input VAT is the correct and relevant choice.