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If you or your business become insolvent your affairs will be taken over by a licensed insolvency practitioner (IP). The IP will be responsible for dealing with HM Revenue & Customs (HMRC) and will notify HMRC of your insolvency and cancel your VAT registration. HMRC will calculate the VAT that you owe based on the amount outstanding at the date on which the business became insolvent. VAT will be claimed up to the day before the date of insolvency. The claim may also include penalties and interest for late or missed payments.
Once your registration is cancelled, a final VAT Return will be issued covering the period from the first day after the end of the last accounting period, up to the day before the date of de-registration.
This guide explains what VAT HMRC will claim and what VAT Returns you have to make.
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From the date of your insolvency, your IP will take over your VAT registration. Your IP will be responsible for submitting returns and paying VAT on supplies made by your business following your IP’s appointment. Your IP will also be responsible for cancelling your VAT registration once all taxable supplies have been completed. However, if you enter into a voluntary arrangement, or if you are declared bankrupt, and continue to trade you will remain in control of your VAT registration and you will be responsible for declaring and paying VAT on your supplies.
If your company enters administration, administrative receivership or liquidation your company’s affairs will be taken over by a licensed IP from the date of that IP’s appointment. Your IP will be responsible for submitting returns and paying VAT on your company’s behalf.
Certain procedures are not treated as insolvencies. These procedures are:
In these cases, your VAT affairs will continue to be dealt with by your local VAT office.
If you or your company propose a voluntary arrangement to pay off your debts, an IP will help you draw up the proposal and will monitor the arrangement if it is approved. However you remain in control of your VAT registration and you remain responsible for accounting for and paying VAT after your arrangement is approved. HMRC will send you VAT Returns for completion:
Voluntary arrangements are dealt with by the HMRC Voluntary Arrangement Service (VAS).
Read guidance for insolvency practitioners in Notice 700/56
HMRC will calculate the VAT that you owe based on the amount outstanding at the date on which the business became insolvent. VAT will be claimed up to the day before the date of insolvency.
The claim may also include penalties and interest for late or missed payments.
The IP appointed to take over the affairs of an insolvent business is responsible for paying and reclaiming VAT from the date of appointment.
Read guidance for insolvency practitioners in Notice 700/56
You're responsible for submitting the pre-insolvency returns for your business. However, if you haven't submitted a return for any pre-insolvency period, then the IP appointed to handle your affairs may do this. Neither they nor you should sign the return - instead, they must write 'completed from the books and records of the company/trader' on it.
