INS11900 - Foreign insolvencies: Introduction
Some businesses liable for tax in the UK may also be liable for tax in other countries. Such a business may become subject to an insolvency procedure in any country in which it operates. The following guidance explains what to do if you discover that a business liable for tax in the UK is subject to an insolvency procedure in another country.
Action at the National Non-Resident Unit (NNRU) or Debt Technical Office (DTO)
Does the business have assets in the UK?
Establish whether or not the business still has assets in the UK. If it does, it may be possible to recover some or all of the UK tax debt by means of distraining on the UK assets of the business, obtaining a County Court judgment or taking winding up proceedings in a UK court.
If the business does have assets in the UK
If the business does have assets in the UK we may distrain on those assets, but only if a ‘responsible person’ is present. For definitions of ‘responsible person’ see guidance at DMBM655760,
In cases of doubt, or cases where distraint is not a practical option for recovering the debt, refer the matter to DMB Enforcement Technical Team at Shipley with full details of the case i.e.
- Date of the foreign insolvency
- Type of insolvency
- Country in which the business has become insolvent
- Amount of HMRC debt and relevant Heads of Duty
The Enforcement Technical Team will advice you as necessary on what further options (if any) we have for recovering the debt outside of the foreign insolvency process.
If the business does not have assets in the UK
If the business has no UK assets then our only option to pursue the debt is by lodging a claim in the foreign insolvency proceedings. Take the following action:
- Refer the case to ICHU using the guidance in the Insolvency Manual at INS2105.
- Contact the National Insolvency Unit (NIU) in Liverpool and inform them of the details of the foreign insolvency.
ICHU will quantify the direct tax claim and the NIU will quantify the indirect tax claim, but both need to be aware of the foreign insolvency.
Action at the NIU
- Input VAT 769, inhibiting the claim
- Contact the Non-VAT Debt team to establish whether there are any non-VAT debts owed by this trader
- Send details of the claim to ICHU (including any Non-VAT debts)
- Deregister the case and input VAT127 for final and any other missing periods and pa the case.
Action at ICHU
Lodge the claim for all HMRC debts to the Foreign IP with a covering letter explaining that the claim is being lodged by HMRC for unpaid taxes/duties in the UK.
It is preferable for us to claim directly in the insolvency, since this will facilitate direct payment of any dividend to us. Therefore the covering letter will ask the foreign IP to accept the claim from us directly rather than require us to ask the assistance of the tax authorities in the country concerned. We can obviously only refer to the possibility of requesting assistance from other countries if there is legislation or an agreement in place which would allow us to do so. Therefore, use the following letters in the following circumstances:
- Business insolvent in a member state of the European Union - We may seek assistance from the tax authorities in the member state concerned under MARD regulations. Use the letter at INS11900A (Word 134K) (remember to include the name of the country concerned)
- Business insolvent in a country outside of the European Union but with which we have a reciprocal recovery agreement - Details of the exact legislation or agreement relating to the country concerned can be found in the ‘country profiles’ at DMBM560200. If the country is listed in the profiles use the letter at INS11900B (Word 134K) quoting the legislation or agreement shown. If the country is not listed in the profiles, move to the 3r d bullet point below.
- If there is no legislation or agreement allowing us to seek assistance for the foreign tax authority - Use the letter at INS11900C (Word 133K).
If you are in doubt concerning any of the above, contact the Enforcement Technical Team at Queens Dock in Liverpool.
Monitor admission of the claim into the foreign insolvency proceedings. Seek advice from the Enforcement Technical Team at Liverpool as necessary.
