Insolvency ― responsibility for VAT, notification and returns

Produced by a Tolley Value Added Tax expert

Value Added Tax

Guidance

This guidance note looks at who is responsible for VAT when a business becomes insolvent, and the associated notification and VAT return requirements.

For an overview of VAT and insolvency generally, see the Insolvency ― overview guidance note.

For in-depth commentary on the legislation, see De Voil Indirect Tax Service V5.187.

Who is responsible for a business’ VAT affairs when it becomes insolvent?

VAT law says that from the date that a person becomes ‘bankrupt or incapacitated’, or in the context of companies going into liquidation, receivership or enters administration, HMRC can treat the office-holder (that is, an official receiver or insolvency practitioner) as a taxable person. HMRC refers to this date as ‘the relevant date’. In general terms, this means that upon insolvency, an office-holder becomes responsible for the VAT affairs of the business from the relevant date onwards (albeit it should be noted that this is not the case for bankrupts continuing to trade, voluntary arrangements, deeds and schemes of arrangement, and county court administration orders).

What

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