CH193460 - Penalty reform - penalties for failure to pay VAT on time from 1 January 2023: other penalty issues: insolvency

NB: “These rules currently only apply to VAT for VAT periods starting on or after 1 January 2023. These rules will come into force for other tax regimes at a future date. You must check the date from which these rules apply for the tax or duty you are dealing with”

In certain circumstances where a customer goes through an insolvency process, we may not charge either the first late payment penalty and/or the second late payment penalty.

Periods included in the insolvency

Once a customer record has been flagged to show that a person is going through an insolvency process, no further late payment penalties will be assessed.

Any late payment penalties which have been assessed after the relevant date will be cancelled.

The relevant date is the date up to which claims by creditors against the insolvent entity are calculated. See https://www.gov.uk/guidance/insolvency-and-vat-notice-70056#types-of-insolvency

Periods following the insolvency

Where a person has continuing payment obligations after an insolvency date, late payment penalties will be assessed in line with the normal process. This applies even if an insolvency practitioner has been appointed.

Insolvencies which end prematurely

It is possible for insolvencies to end prematurely, for example, because a bankruptcy is annulled, rescinded or recalled.

If the insolvency flag on the customer record had resulted in late payment penalties not being assessed, these would be assessed once HMRC became aware of the premature end to the insolvency.

If the insolvency flag on the customer record had resulted in any late payment penalties being cancelled, they would be re-assessed once HMRC became aware of the premature end to the insolvency.

This assessment and re-assessment would be subject to the assessing time limits at CH193260.