Insolvency (VAT Notice 700/56)

1. Overview

1.1 What this notice is about

This notice explains the:

• basic principles of how we treat insolvent businesses
• procedures which insolvency practitioners are asked to follow when dealing with HMRC

Although this notice details VAT procedures, it can be applied to cases when traders are involved in another indirect tax or duty administered by us.

1.2 Who should read this notice

This notice is for insolvency practitioners and official receivers (office holders) who are dealing with the business activities of VAT-registered traders.

1.3 Status of this notice

The reproduction of the VAT Return (form VAT 100) has the force of law, as explained in regulations 25 and 25A of The Value Added Tax Regulations 1995.

This notice does not otherwise have the force of law, but explains how we interpret the law on insolvency processes in relation to VAT.

1.4 More information and advice

If you have a case specific VAT enquiry concerning an insolvent case, for example, if a pre-insolvency return has been provided, or if set-off will apply in a particular circumstance, quote the VAT registration number and contact the appropriate insolvency team.

Use these contacts for:

• bankruptcies
• sequestrations
• administrative receiverships
• liquidations (including members voluntary liquidations)

For individual cases

Bankruptcies

Email: eis-dmindividualclaimsteam@hmrc.gov.uk

Telephone: 0300 322 9242

Opening times:

Monday to Friday: 8am to 5pm

Trust deeds (Scotland)

Email: Trust.Deeds@hmrc.gov.uk

Telephone helpline for trust deeds: 0300 322 9200

Opening times:

Monday to Friday: 8am to 5pm

Scottish sequestrations and Northern Ireland bankruptcies (individuals and partnerships)

Email: Trust.Deeds@hmrc.gov.uk

Telephone helpline: 0300 322 9200

Opening times:

Monday to Friday: 8am to 5pm

For Company Cases

Creditor Voluntary Liquidations and Compulsory Liquidations

Email: vatinsolvencyonly@hmrc.gov.uk

Telephone: 0300 322 9241

Opening times:

Monday to Friday: 8am to 5pm

Members Voluntary Liquidations

Email: mvl.teameisw@hmrc.gov.uk

When you contact the MVL Mailbox, you should use specific email subject headings to help us deal efficiently with your correspondence. Do not include the name of the insolvency case in the email subject heading or use any other characters (for example, dates, numerical, hyphens). Only use one of the following options as your email subject header: 

• Repayment
• Claim (this includes new, amended claim requests or queries)
• Complaint
• Notice of intended dividend or NOID
• Stat Interest
• Future debt payment calculation
• Misc (only use when the query does not fit any other option)

To help us deal with your queries as quickly as possible, include in the body of your email, all known tax references or indicate non-registration for a specific head of duty.

Telephone: 0300 322 7815

Opening times:

Monday to Friday: 8am to 5pm

Company administrations

Email: eisc.administration@hmrc.gov.uk

Telephone helpline: 0300 322 9250

Opening times:

Monday to Friday: 8am to 5pm

If you have a VAT enquiry not covered in this notice, contact the VAT helpline.

1.5 Voluntary Arrangement Service

The Voluntary Arrangement Service at Cardiff deals with company voluntary arrangements. All company voluntary arrangement proposals for HMRC as well as VAT 769 notification forms for voluntary arrangements should be sent to:

Email: eisc.cva@hmrc.gov.uk

Telephone helpline: 0300 322 9251

Opening times:

Monday to Friday: 8am to 5pm

All individual voluntary arrangement proposals for HMRC as well as VAT 769 notification forms for individual voluntary arrangements should be sent to:

Email: vas@hmrc.gov.uk

Telephone helpline: 0300 322 7838

Opening times:

Monday to Friday: 8am to 5pm

2. Types of insolvency

2.1 What is insolvency

Insolvency occurs when individuals or businesses:

• do not have enough assets to cover their debts
• cannot pay their debts when they become due

We refer to the official receiver, or to the insolvency practitioner appointed over an insolvent business’s affairs, as the ‘office holder’.

Office holders are liable to account for VAT in the normal way following their appointment.

2.2 What types of insolvency there are

There are various types of insolvency procedure which a VAT-registered business may enter.

Insolvencies are defined in law. In this notice we have grouped them into:

• formal insolvencies
• business rescue procedures
• those receiverships which we do not treat procedurally as insolvencies

When appropriate, the date that establishes our claim in the insolvency (the relevant date) appears after the definition.

2.3 Formal insolvencies

2.3.1 Administrative receivership

An administrative receiver may be appointed to manage the affairs of a company. This may be done by a secured creditor who holds a debenture agreement containing floating (or fixed and floating) charges over the whole (or substantially the whole) of a company’s assets.

Upon the appointment of the administrative receiver, the floating charges will crystallise.

The administrative receiver must treat the business assets covered by the charges in such a way as to recover the money due to the secured creditor. If the administrative receiver deems it to be in the best interests of the secured creditor, the business will continue to trade.

We take the date of the receiver’s appointment as the relevant date.

2.3.2 Bankruptcy

A bankrupt is an individual against whom the court has made a bankruptcy order.

The court can declare a person bankrupt on petition from the individual, one or more of their creditors, or the supervisor of an individual voluntary arrangement.

The order indicates that the person is unable to pay their debts and, subject to certain exceptions, deprives them of their property, which can then be sold in order to pay their creditors.

We take the date of the bankruptcy order as the relevant date.

2.3.3 Sequestration

This is the bankruptcy process of an individual, or partnership (firm) in Scotland.

If the debtor presents the petition for sequestration, then we treat the date on which sequestration is awarded as the relevant date.

The court issues a citation, or warrant, to order the debtor to appear before the court within 14 days to state their case as to why sequestration should not be awarded, if the petition for sequestration is presented by a:

• creditor
• trustee acting under a trust deed

If the debtor fails to appear, sequestration is awarded.

In such cases, we take the date of the original ‘warrant to cite’ as the relevant date.

2.3.4 Creditors’ voluntary liquidation

A creditors’ voluntary liquidation usually relates to an insolvent company and is commenced by a resolution of the shareholders.

A creditors’ meeting is called so that the creditors of the company may, if they want, appoint another insolvency practitioner in place of the shareholders’ appointee.

HMRC takes the date of the extraordinary resolution as the relevant date.

2.3.5 Members voluntary liquidation

The directors of a company, or the majority of its directors, make a declaration of solvency.

In the declaration, the directors state their opinion that the company will be able to settle its debts in full, plus interest, within a period not exceeding 12 months of it being placed in liquidation.

The declaration must be made within the 5 weeks immediately preceding the date of the passing of the resolution for winding-up.

Liquidation takes place when the resolution is passed.

We take the date of the resolution as the relevant date.

Before entering into a Members Voluntary Liquidation (MVL), suitable enquiries should be made to establish the company’s current tax position by engaging with the company’s directors and either the current or previous agent.

Where there are outstanding pre-appointment returns, we will continue to advise Insolvency Practitioners, and expect those outstanding matters to be rectified as soon as practicably possible. Outstanding returns must be submitted using the normal channels. They should not be emailed to the MVL Team. We cannot submit an accurate proof of debt until all returns have been submitted.

To reduce the risk of a subsequent compliance check, you should allow reasonable time for HMRC to process any returns before closing your case. A liquidator should satisfy themselves that all outstanding tax returns have been submitted and that all debts have been paid in full, together with interest, before finalising the MVL. We will take appropriate action and report any conduct issues to insolvency regulators if we believe a company has been dissolved without satisfactorily resolving its tax affairs.

On 6 December 2023, we discontinued the provision of tax clearance in Members’ Voluntary Liquidations. Following this process change, clearance requests from insolvency practitioners, or any other representative of the company, are no longer actioned. It is important to note that the cessation of clearance provision extends to all procedures outlined in the Insolvency Act 1986, encompassing both solvent and insolvent liquidations, as well as administrations.

2.3.6 Compulsory winding-up

The court orders a compulsory winding-up as the result of the presentation of a petition by:

• the company
• its creditors
• its directors
• one or more of its shareholders
• the Secretary of State

We take the date of the winding-up order as the relevant date.

2.3.7 Partnership winding-up

The court orders a compulsory winding-up as a result of the presentation of a petition by:

• the members of the partnership
• a creditor

We take the date of the winding-up order as the relevant date.

2.3.8 Provisional liquidation

The court may appoint a provisional liquidator after the presentation of a petition for a winding-up in order to protect the assets of a company before a winding-up order is made.

When a provisional liquidator has been appointed, we do not treat the case as insolvency until a winding-up order is made and a ‘permanent’ liquidator appointed.

We take the date of the appointment of the provisional liquidator as the relevant date and issue the insolvency claim to the permanent liquidator.

2.4 Business rescue procedures

2.4.1 Company administration

The court may appoint an administrator following an application by either the company, its directors or one or more of its creditors. In addition, an administrator may be appointed out of court by the:

• company or its directors
• holder of a qualifying floating charge

The administrator must perform their functions:

• firstly, to rescue the company
• secondly, if that is not practicable, to achieve a better result for the company’s creditors as a whole than would be achieved in a winding-up
• thirdly, if the second option is not practicable, to do their best for the secured and preferential creditors without unnecessarily harming the interests of the creditors as a whole

We take the date of the administration order as the relevant date.

You can find specific rules in relation to Corporation Tax accounting periods for companies in administration in the Company Taxation Manual.

2.4.2 Partnership administration order

The court appoints an administrator following an application by the members of the partnership or by a creditor, which is intended to allow:

• the partnership, or part of it, to survive in a restructured form
• for the approval of a partnership voluntary arrangement
• for a better realisation of the company’s assets than would be obtained from winding-up the partnership

We take the date of the partnership administration order as the relevant date.

2.4.3 County court administration order

A county court administration order is only available to individuals.

You can apply to the County Court for an administration order to stop your creditors taking any further action against you.

If an order is granted, you can make regular payments over a period of time to the court to settle your debts. The court will administer the payments between your creditors.

We take the date of the administration order as the relevant date.

2.4.4 Deceased persons’ administration order

An order made for the administration of a deceased person’s estate.

We take the date of the administration order as the relevant date.

2.4.5 Deed of arrangement

This is a method by which an individual can arrange terms with creditors.

We take the date of execution of the deed as the relevant date.

2.4.6 Scheme of arrangement

A term normally used to describe a compromise or arrangement between a company and its creditors or members or any class of them, which may involve a scheme for the reconstruction of the company.

We take the date of the creditors’ meeting confirmed by the court order as the relevant date.

2.4.7 Scottish trust deeds

A debtor grants a deed in favour of the trustee that transfers their assets to the trustee for the benefit of creditors.

We take the date the deed is signed as the relevant date.

2.4.8 Voluntary arrangements

A voluntary arrangement provides an alternative to bankruptcy or liquidation without the attached restrictions:

1. The debtor makes proposals through a licensed insolvency practitioner, which are presented to a meeting of creditors. Creditors must be given 14 clear days notice of such a meeting. The proposals will usually involve delayed or reduced payment of debts, and should be advantageous to both the debtor and the creditors.

2. A supervisor will be appointed to monitor the arrangement for its duration. The trader usually continues to be responsible for the business activities unless, in the case of a company, the proposal provided for either an administrator or liquidator to continue trading the company for some or all of the arrangement’s duration.

Company and partnership voluntary arrangements are similar. A moratorium may be sought preventing certain recovery actions in order to grant a breathing space for the business.

We take the date of the creditors’ meeting when the voluntary arrangement was approved as the relevant date.

For information and support with voluntary arrangements you should read the working with insolvency practitioners guidance.

2.5 Procedures not treated as insolvencies

2.5.1 Agricultural charge receivership

A secured creditor can appoint a receiver under the Agricultural Credits Act 1928 over the assets of a farm estate.

2.5.2 Fixed charge receivership

A receiver, or receiver and manager, is appointed by a secured creditor who holds a fixed charge over the specific assets of a business. The assets will be used for the benefit of the secured creditor.

2.5.3 Law of Property Act receivership

A lender, such as a bank, can appoint a receiver over a mortgaged property under the Law of Property Act 1925 to recover money advanced.

The receiver will usually try to arrange for the property to be sold or will be responsible for collecting rents for the mortgagee. The business may continue to trade independently of the receiver’s appointment.

2.5.4 Court appointed receivership

The court is able to appoint a receiver to collect property over which they are appointed. No property is invested in such a receiver, but their appointment acts as an injunction restraining other parties from realising assets, which the receiver has been appointed to receive.

You do not need to contact the VAT helpline to notify us of these appointments.

Law of Property Act or fixed charge receivers who want to enquire if there’s an option to tax on a particular property should contact the option to tax service.

2.5.5 Company moratorium 

A company can apply for a company moratorium where it cannot pay its debts or is likely to become unable to pay its debts. Creditors whose debts fall in the pre-moratorium period are not allowed to enforce those debts while the company is in moratorium.

Any company which enters into a moratorium must pay any debts due after the company moratorium date. 

VAT returns will continue to be sent as normal by us during a moratorium and we do not issue split period VAT returns for the VAT period in which a company enters into a moratorium. 

All VAT returns which have a payment date on or after the date the company entered moratorium will be treated as ongoing liabilities. The company should pay those VAT returns or we may contact the company monitor to ask for the moratorium to be terminated so we can enforce our debt against the company. 

All VAT returns with a payment due date before the date on which the company entered into moratorium are included. These cannot be enforced by us and are not treated as ongoing liabilities.

3. Notifications

3.1 How to notify HMRC of insolvency

Complete form VAT 769 within 21 days of your appointment if you’re appointed as a:

• trustee in the bankruptcy or sequestration of a VAT-registered individual
• liquidator of a VAT-registered company
• receiver in the administrative receivership of a VAT-registered company
• administrator in the administration of a VAT-registered company

Form VAT 769 should also be completed on the approval of a voluntary arrangement (read paragraph 1.5).

The information on the form allows us to quantify the VAT element of our claim in the insolvency quickly and issue split VAT Returns for the pre and post appointment accounting.

3.2 When form VAT 769 does not apply

You should not use form VAT 769 to notify HMRC of:

• a proposed creditors’ meeting for either a voluntary arrangement or a creditors’ voluntary liquidation
• Law of Property Act receiverships
• the appointment of receivers or managers under a fixed charge only
• the appointment of receivers over the assets of a farm estate under the Agricultural Credits Act 1928
• the appointment of a provisional liquidator
• appointing a liquidator under a qualifying decision procedure

For more information about these procedures read paragraph 2.5.

3.3 Who’s responsible for the information supplied on form VAT 769

Responsibility for making sure all the details supplied on the form VAT 769 are accurate, and that they’re proper to the correct VAT-registered trader, lies with the office holder appointed to take charge of the insolvent business.

3.4 How to complete form VAT 769

You must complete all the mandatory fields in the form, if you do not, we will not be able to process your notification of insolvency.

You’ll need to provide the following information:

• VAT registration number of the insolvent business
• type of insolvency
• relevant date for the claim (that’s the effective date of insolvency)
• full name of the insolvent registered business
• name and title of the appointed office holder
• full name of firm and postal address, including postcode, of the office holder

3.5 Office holder appointed after an official receiver

If you’re an office holder appointed after an official receiver, we expect you to notify us of your appointment within 21 days and complete all the mandatory fields in form VAT 769.

You’ll need to provide the following information:

• name and phone number of a person to contact about the insolvency
• reference for correspondence, or the court reference
• the date of appointment of the office holder, if it is different from the relevant date for the claim
• the date that trading ceased
• if a dividend is likely
• if prospects of a dividend will be affected by litigation
• sign and date the form

3.6 Liquidators appointed after the appointment of an administrative receiver — England and Wales, Scotland and Northern Ireland

If you’re appointed liquidator after the appointment of an administrative receiver, do not complete a form VAT 769 as the administrative receiver should already have completed one.

We will need to be informed of who controls the company’s assets and has responsibility for submitting VAT Returns.

Provide us with this information, making sure that you include:

• the trader’s VAT registration number
• the date of your appointment
• your name and address

Send it to:

Email: vatinsolvencyonly@hmrc.gov.uk

Telephone helpline:

Creditors and Compulsory Liquidations: 0300 322 9241

Members Voluntary Liquidations: 0300 322 7815

Opening times:

Monday to Friday: 8am to 5pm

Do not send a completed form VAT 769 in this circumstance.

3.7 Liquidator or trustee appointed after an official receiver

If you’re appointed liquidator or trustee after an official receiver, notify us of your appointment using the form VAT 769.

Make sure you provide the relevant date for the claim and the date of your appointment as, in this instance, they’ll usually be different.

3.8 Advice or help

Before you fill in the form VAT 769, read the guidance notes printed on the reverse of the form.

If you need more advice or help, contact the appropriate HMRC office as shown in paragraphs 1.4 and 1.5 of this notice.

4. Claims

4.1 Calculation of claims

Once notified that a VAT-registered business has become insolvent, we will calculate our claim based on the amount outstanding at the date on which the business became insolvent. You can get a more detailed breakdown of the claim from the issuing office.

4.2 Relevant date

The relevant date is the date which establishes our claim in the insolvency. The claim will include VAT up to the day before the relevant date.

When the business continues to trade, the office holder will have responsibility for the VAT affairs of the business from the relevant date onwards. Exceptions to this are:

• bankrupts continuing to trade
• voluntary arrangements
• deeds and schemes of arrangement
• county court administration orders

4.3 Amended claims

We will issue an amended claim if there are any adjustments made to the insolvent trader’s pre-appointment VAT account which affect our original claim.

The amended claim liability will supersede the original claim notification.

4.4 Tax assessments

If a VAT Return has not been submitted for any VAT accounting periods falling before the relevant date, the tax liability for the periods may be assessed by a computer calculated assessment.

We may withdraw this type of assessment once an acceptable VAT Return has been submitted.

If you require a duplicate return you should contact the appropriate HMRC insolvency team for the insolvency type concerned using the contact details contained at paragraph 1.4. We reserve the right to verify the accuracy of any returns received.

Assessments relate to individual prescribed accounting periods. They’re normally issued as the result of:

• under or over declarations of VAT discovered during an inspection of the VAT records
• the best available means in the absence of records
• a declaration by the trader

Each assessment line corrects the liability previously declared or assessed for the relevant accounting period.

Error correction notifications (formerly known as voluntary disclosures) by the registered trader, or by the insolvency practitioner, of amounts which have been under or over declared follow the same pattern.

Subject to time limits we have the right to assess the tax liability for any period when a return has not been submitted or if there’s evidence that tax is due.

4.5 VAT penalties and interest

You can find information on default interest for VAT in Default interest (Notice 700/43).

Interest is also chargeable on assessments and voluntary disclosures for:

• Air Passenger Duty
• Insurance Premium Tax
• Landfill Tax
• Climate Change Levy
• Aggregates Levy

4.5.1 Civil penalties or criminal penalties

Civil penalties can be raised for various reasons including:

• late notification of a liability to be registered
• inaccuracies on taxpayer’s returns or documents
• breaches of regulations
• dishonesty

Criminal penalties can also be raised if a criminal offence is committed. These penalties will be raised by the courts and will not be included in our insolvency claim.

4.6 Penalty interest

Penalty interest can also be charged for late payment of:

• Landfill Tax
• Climate Change Levy
• Aggregates Levy returns

It’s also chargeable on:

• tax or levy assessments
• penalties
• interest
• penalty interest in relation to Landfill Tax, Climate Change Levy and Aggregates Levy

4.7 Proof of debt

In bankruptcies and compulsory liquidations the office holder can request a proof of debt from the Enforcement and Insolvency Service. You can find the relevant addresses in paragraph 1.4.

5. Returns

It is important when submitting a paper return, you should not attach any other documents or cheques.

5.1 The VAT Return

The great majority of businesses must file their returns using functional compatible software and pay any VAT due electronically. The only exceptions to this are businesses subject to an insolvency procedure and businesses who have been granted an exemption.

If a business is exempt from submitting a software return or an online return then the alternative is a paper return.

5.2 Pre-insolvency returns

The insolvent business has responsibility for submitting pre-insolvency returns. But, the office holder may submit a return for any pre-relevant period for which the trader has not submitted a return.

Leave the return unsigned, but add the legend, ‘completed from the books and records of the company or trader’.

The final pre-insolvency return covering the period up to the relevant date will be issued automatically to the office holder. This return will not be subject to default surcharge.

5.3 Split period returns

When the relevant date falls within a prescribed VAT accounting period for which no tax liability has been declared, VAT Returns will be issued covering the immediate pre and post appointment accounting periods.

VAT Returns issued for the:

• outstanding pre-appointment period run from the beginning of the prescribed accounting period to the day immediately prior to the date of appointment

• first post-appointment VAT accounting period run from the date of appointment to the end of the next prescribed accounting period

5.4 Post-insolvency returns

Returns will be issued automatically to the office holder on a monthly or quarterly basis as appropriate.

The office holder has legal responsibility for completing and submitting post-insolvency returns and accounting for any tax due, with these exceptions:

• voluntary arrangements
• deeds and schemes of arrangement
• county court administration orders

5.5 Application of penalties

5.5.1 Penalties due under VAT Act 1994

VAT default surcharge, VAT civil penalties and VAT default interest are not normally applied to post-insolvency VAT Returns, except in the case of:

• administrations
• partnership administration orders
• deceased persons’ administration orders
• deeds and schemes of arrangement
• Scottish trust deeds
• county court administration orders
• voluntary arrangements

5.5.2 Inaccuracy penalties due under Schedule 24 FA 2007

Inaccuracy penalties due under this act are applied both before and after insolvency VAT Returns and relevant documents in all cases. Factsheet CC/FS7a provides details of the penalty for the inaccuracies regime.

5.6 Repayments

Returns submitted showing a repayment due to the business will be repaid in the name of the insolvent business, care of the office holder.

We aim to make the repayment within 30 days of receipt of the return, subject to verification of the declaration. Repayments will be delayed if:

• the form VAT 769 is inaccurate
• you have failed to notify us of the appointment of the office holder

We may make repayments for:

• businesses in voluntary arrangements
• deeds and schemes of arrangement
• county court administration orders

5.7 Repayment interest on VAT credits or overpayments

Read about repayment interest on VAT credits or overpayments.

5.8 Compliance

We have the right to check the accuracy of all returns submitted and to require that the books and records of the business be made available for inspection.

In certain circumstances, when it can be shown an office holder has consistently not complied with regulations, a report may be made to the appropriate licensing authority.

6. Cancel your VAT registration

6.1 What is VAT registration cancellation

VAT registration cancellation is the process by which a VAT-registered business is removed from the VAT register and the VAT registration number cancelled.

6.2 When VAT registration cancellation applies

Read about how to cancel your VAT registration and what happens after.

More information about cancelling your VAT registration can be found in Cancelling your VAT registration (Notice 700/11).

‘Taxable supplies’ in this context includes sales of assets. You should therefore not apply to cancel your VAT registration immediately upon your appointment over a business, even if that business has ceased to trade, as the VAT arising from asset sales will still need to be included on a post-appointment VAT Return.

The sale of assets must be evidenced by a legally valid VAT invoice and, for a VAT invoice to be legally valid, the business must be VAT registered at the point that the invoice is issued.

6.3 How to cancel your VAT registration

You should apply to cancel the VAT registration of the business concerned by completing form VAT 7. The completed form should be sent to the address on the form.

6.4 VAT group registrations

When a VAT group is being cancelled, form VAT50-51 must be used for this purpose rather than form VAT 7.

6.5 Cancel your registration online

You can cancel your registration and make other changes online. You can ask an agent to do this for you. As the VAT-registered person, you will still be responsible for the accuracy of the information.

7. Post VAT registration cancellation

7.1 Input tax

Post VAT registration cancellation input tax may be claimed on form VAT426: insolvent traders claim for input tax after cancellation of VAT registration.

This form is to be used only by office holders referred to in paragraph 7.2.

7.2 Who can use form VAT426

The form is available for use by:

• trustees in bankruptcy
• trustees in sequestration (in Scotland)
• official receivers
• liquidators
• administrative receivers

7.3 Who cannot use form VAT426

Form VAT426 may not be used by solvent traders to cancel their VAT registration, office holders in business rescue procedures and other incapacitated traders.

These categories include:

• supervisors in voluntary arrangements
• administrators in company administrations
• trustees appointed under a trust deed (in Scotland)
• Law of Property Act receivers
• receivers appointed in a partnership dispute
• receivers appointed by a court
• receivers appointed under the Agricultural Credits Act 1928
• office holders appointed for a scheme of arrangement
• administrators appointed for a deceased person’s administration order
• liquidators in a members’ voluntary liquidation

7.4 What you can and cannot claim on the form VAT426

You’ll find the basic rules about input tax in VAT guide (Notice 700).

You can claim input tax:

• on services supplied after cancellation of VAT registration but relating to business carried on before cancellation if VAT registration
• on goods and services supplied and invoiced before cancellation of VAT registration which has not already been claimed on a VAT Return
• on the services of agents (for example, solicitors or estate agents)
• on realisation fees
• on bad debt relief (read section 10)

You cannot claim input tax:

• relating to pre-insolvency tax periods
• on charges made by, for example, solicitors, estate agents and stockbrokers relating to exempt supplies
• on pro forma invoices which cannot be claimed as input tax correctly
• relating to a petitioning creditor’s costs

These general rules also apply:

• you’re entitled to claim only tax which relates to goods and services used in the making of taxable supplies (you should calculate exempt input tax in accordance with the guidance given in Partial exemption (Notice 706))
• you can only claim relief from VAT on those services which, though supplied after the registration was cancelled, relate to taxable activities
• there’s no relief from VAT on goods supplied to you after the date of VAT registration cancellation or on services which are not attributable to taxable supplies
• you must keep all invoices supporting your claim with the relevant books and records in case your claim is selected for verification

7.5 Where to send completed form VAT426 claims

You should send your completed form VAT426 claims to:

You can contact the VAT426 Team on telephone: 0300 322 9246.

Provide supporting invoices for amounts claimed of £20,000 or over. Claims for amounts of £20,000 and over will be paid by Bacs (Bankers Automated Clearing System) so provide Bacs details for these claims.

You can expect to receive a payable order within 30 working days from the date HMRC get your completed claim at this address, subject to the verification of your claim.

7.6 Verification of claims

We will select some claims for verification. This may be carried out by the local VAT office that will make arrangements to visit you within 30 working days from the date the VAT426 processing team receives your claim.

Most verification visits will be made after we have authorised your repayment claim. But in some instances, we may decide to withhold repayment until we have completed our enquiries.

If we disallow any part of your claim, you may be held liable to bear the cost of any VAT we’ve disallowed.

7.7 Form VAT427 (claim for input tax made post VAT registration cancellation relating to goods and services supplied prior to VAT registration cancellation)

The form VAT427 should be used in the following circumstances:

• members voluntary liquidations
• administrations
• Scottish trust deeds
• deeds or schemes of arrangement
• voluntary arrangements

The completed form VAT427 should be sent to:

The criteria for reclaiming input tax on form VAT427 is the same as form VAT426 as outlined at paragraph 7.4.

7.8 Output tax

VAT on taxable stocks and assets remaining at the date of insolvency must be accounted for on post-appointment returns.

VAT must not be charged post VAT registration cancellation, since a cancelled VAT registered business cannot legally issue a VAT invoice.

The VAT registration will therefore be kept open until all trading has ceased and asset realisation is complete (though insolvent businesses that continue to trade may cancel their VAT registration voluntarily on turnover grounds if they can satisfy the conditions in paragraph 3.2 of Cancelling your VAT registration (Notice 700/11)).

Any cases of difficulty, for example, difficulty in selling a property where there is an option to tax, may be discussed with the appropriate HMRC insolvency team using the contact details in paragraph 1.4.

Read paragraph 17.3 for details of the method Law of Property Act receivers should use to account for output tax.

7.9 Form VAT 833

The form VAT 833 (goods sold in satisfaction of a debt) must not be used to account for output tax post VAT registration cancellation for the reason outlined in paragraph 7.8. Form VAT 833 may still be completed for use in these processes:

• deeds and schemes of arrangements
• County Court administration orders
• Scottish trust deeds
• deceased persons’ administration orders
• management of property by Law of Property Act receivers

In all cases you should send form VAT 833 to:

8. Dividends

8.1 Declaring a dividend

Payments for a claim should be made through Bacs or CHAPS (Clearing House Automated Payment System) using these details:

Sort code: 20 20 48
Account number: 30944793
Account Name: HMRC NIC Receipts

Reference number — the EIS reference number will be quoted on all new HMRC claims and letters and will be used as a reference for the lifetime of the claim.

Payments cannot be accepted without a reference.

Payment reference number — the unique case reference number can be found on our claims. You’ll need to use this 13-character payment reference when you pay. This is the customer’s 10-digit unique case reference number followed by a 3-letter suffix to show the type of insolvency the dividend refers to. This table details the dividend types and their unique 3-digit suffixes.

Dividend type suffix	3-digit suffix
Individual Voluntary Arrangement	IVA
Sequestrations	SEQ
Trust deeds	TRD
Northern Ireland bankruptcy	IBY
Members voluntary: liquidations	MVL
Company liquidation cases	LIQ
Individual bankruptcy or partnerships	BKY
Company Voluntary Arrangement	CVA
Partnership Voluntary Arrangement	PVA
Administration	ADM
Petition costs	PET

Our unique case reference numbers start with 623 or 075 or 880 followed by 7 digits.

You can contact us if you are unsure how to use the reference format, or our claim does not have a reference number.

8.2 What happens when part of a claim is paid as a dividend

When part of a claim is paid as a dividend, the claim figure on which any subsequent dividend payments are calculated is not reduced. The claim calculated at the relevant date stands, and all dividend payments must be based on that figure.

Where to send dividends

For businesses subject to:

• any form of administration — send to the Enforcement and Insolvency Service (read paragraph 1.4)

• voluntary arrangements — send to the Voluntary Arrangement Service (read paragraph 1.5)

For Scottish trust deeds and deeds or schemes of arrangement, you should send dividends to:

8.3 Notice of intended dividend

If you have not received a claim from us and you intend to pay a dividend, submit your notice of intended dividend by email. You’ll need to use the contact details in paragraph 1.4 of this notice.

9. Bankrupt continues to trade

9.1 Who’s responsible

When trading continues after bankruptcy, the bankrupt retains responsibility for the submission and payment of VAT Returns covering post-bankruptcy periods. It is therefore important that the trustee informs the Enforcement and Insolvency Service (read paragraph 1.4) if the bankrupt continues to trade beyond the date of bankruptcy.

We will establish the pre-bankruptcy position to allow us to lodge a claim, make a repayment to the office holder, or operate Crown set-off (read section 13) as appropriate.

9.2 Accounting for tax in your period of office

If you have tax to account for in respect of your period of office, you must not include this tax on the business’ post-bankruptcy returns.

We’ll issue forms to you on request to allow you to account for the tax.

Completed forms should be returned to the Enforcement and Insolvency Service.

10. Bad debt relief

10.1 What bad debt relief is

If you have made supplies of goods or services to a customer and you have not been paid for them, you may be able to claim relief from VAT on the debts you have incurred as long as you can meet all the statutory requirements of the bad debt relief scheme.

You’ll find more information about the scheme in Relief from VAT on bad debts (Notice 700/18).

10.2 Claiming bad debt relief

Bad debt relief claims made for insolvent traders can be made on VAT Returns in cases when the VAT registration remains open. When the VAT registration has been cancelled, use form VAT426.

A letter scheduling the bad debt relief claim details, together with copies of the relevant invoices, must be submitted for approval.

Extra-statutory concession relieving office holders from input tax clawback provisions

An extra-statutory concession has applied from 26 November 1996 which relieves office holders or insolvent traders from the need to repay us input tax when:

• supplies were made to the insolvent trader prior to the relevant date
• no payment has been made
• notification that bad debt relief has been claimed by the supplier is received on or after the insolvency date

11. Cash accounting

11.1 What cash accounting is

The Cash Accounting Scheme allows VAT-registered businesses with a turnover limit up to £1,350,000, to account for VAT on the basis of payments received and made rather than on tax invoices issued and received.

Read Cash Accounting Scheme (Notice 731) for information about how the scheme operates.

11.2 How insolvency affects cash accounting

The office holder is responsible for the Cash Accounting Scheme adjustment described in paragraph 11.3.

The office holder responsible for the business may use the scheme in the post relevant period if the insolvent business was eligible to use the scheme pre-insolvency and continues to be eligible to do so. This may be appropriate in cases when trading has continued after the relevant date.

11.3 Post-insolvency cash accounting adjustment

The cash accounting regulations were amended with effect from 3 July 1997.

For insolvencies:

• prior to 3 July 1997 — the office holder will be required to account for tax on all supplies made or received in the 6 months immediately prior to the relevant date which have not already been accounted for

• on or after 3 July 1997 — tax must be accounted for, within 2 months of the relevant date, on all supplies made and received up to the date of the insolvency which has not previously been accounted for

For businesses in:

• administration
• voluntary arrangements
• deeds and schemes of arrangement
• county court administration orders

When the relevant date falls:

• on or after 1 January 1998 — tax must be accounted for on all supplies made and received up to the date of the insolvency
• prior to 1 January 1998 — no adjustment at the relevant date is required

This tax should be entered on the VAT Return for the period immediately preceding the relevant date, and is treated as a liability arising before the insolvency.

12. Credit notes

12.1 Information about credit notes

General guidance on credit notes can be found in the VAT guide (Notice 700).

12.2 Time limit

When a credit note evidencing a decrease in consideration is received or issued by an office holder after the relevant date, adjustments of VAT resulting from such credit notes will relate to the VAT accounting period in which the decrease in consideration took place.

12.3 Pre-insolvency supplies

If you issue a credit note evidencing a decrease in consideration for supplies made in a pre-insolvency VAT period, the effect is to reduce the output tax due in that period and reduce our claim in the insolvency.

If you receive such a credit note which for supplies made in a pre-insolvency VAT period, the effect is to reduce the input tax which can be claimed in that period and so to increase our claim in the insolvency.

Since the adjustment of VAT arising from the credit note applies in the VAT accounting period in which the supply increase or decrease in consideration took place, the VAT Return for the period in question will often already have been submitted once the credit note comes to light.

In that event, the credit note adjustment should be declared either by letter or by means of a voluntary disclosure to the relevant office.

Provide details of the VAT element and the date of the original supply. If you have not yet submitted a VAT Return for the period concerned and you’re intending to do so, the return must include the credit note adjustment.

12.3.1 Voluntary arrangement

In the case of a company voluntary arrangement the adjustment should be made on the normal basis, that is, in the period the adjustment takes effect in the business accounts of either the taxable person issuing the credit note or the customer receiving one.

12.3.2 Scottish trust deeds

For Scottish trust deeds credit notes should be treated on the normal basis outlined in paragraph 12.3.1.

12.3.3 Other insolvencies

Credit notes for all other types of insolvency should be accounted for on the normal basis outlined in paragraph 12.3.1.

13. Crown set-off

13.1 What a Crown set-off is

We are entitled to set-off any pre-insolvency credits against pre-insolvency debt owed by the debtor in for other duties administered by us. We can offer any remaining credits arising from insolvent traders’ VAT repayment claims accruing before the relevant date to other government departments. This will allow other government departments to reduce or satisfy their claims against the same insolvent trader.

The credits may arise from VAT repayment claims, credits for Insurance Premium Tax, Landfill Tax or Air Passenger Duty. We’ll undertake such set-off whenever it is cost-effective for us to do so, this will usually mean that set-off enquiries will not be initiated for credits below £250.

The balance of any credit remaining following such set-off will be repaid automatically to the insolvent estate, care of the office holder, or to the trader if the business is in a voluntary arrangement, deed or scheme of arrangement or county court administration order.

Crown set-off will take place after either all pre-relevant returns have been received or assessments raised and set-off, or both.

Crown set-off will not apply if the credit is secured by a valid fixed charge on book or other debts.

13.2 Set-off and preferential debts

When we owe a pre-insolvency credit to a debtor and seek to set this off against pre-insolvency debts owed by the debtor, which are both preferential and non-preferential (sometimes called ‘unsecured debts’), this is undertaken differently depending on the UK jurisdiction of the insolvency.

For insolvencies under the law of England, Wales and Northern Ireland, the amount due from us to the debtor must be set-off rate​ably against the non-preferential debt and the preferential debt, in proportion to the respective amounts of those debts.

In insolvencies under the law of Scotland, set-off operates differently. We will set-off any sums due to the debtor against HMRC non-preferential debt first, then any remainder against our preferential debt.

Find out more about preferential debts.

14. Taking control of goods or distraint

14.1 What taking control of goods or distraint are

Distraint (attachment in Scotland) is a commonly used method of recovery by taking possession of a debtor’s goods and selling them, usually at public auction, after which the proceeds are set against the debt and costs.

Distraint does not require the sanction of a court order.

Distraint will no longer be used in England and Wales with effect from 6 April 2014 when the relevant legislation will be repealed but will continue to be used in Northern Ireland.

Taking control of goods replaced distraint in England and Wales from 6 April 2014.

Taking control of goods is the process under which a debtor’s goods are seized and sold in settlement of outstanding costs, tax and interest.

The relevant legislation is in Part 3 (‘enforcement by taking control of goods’) of the Tribunals, Courts and Enforcement Act 2007 (TCEA07) and supporting regulations. This is Ministry of Justice legislation binding on the whole bailiff industry in England and Wales.

14.2 Bankruptcies and compulsory winding-up

Once a bankruptcy order or compulsory winding-up order has been made, any incomplete ‘taking control’ (England and Wales) distraint (Northern Ireland) action (that is, the goods seized have not been sold), may be completed by us with the authority of the trustee in bankruptcy or liquidator, or the trustee or liquidator may insist on the goods being released to them to sell subject to an undertaking provided by us.

If taking control or distraint has been completed by sale within the 3 months immediately preceding the date of a bankruptcy or winding-up order, the proceeds of taking control or distraint may be surrendered to the trustee in bankruptcy or liquidator if the trustee or liquidator is unable to pay the preferential creditors in full from other realisations.

The trustee or liquidator must satisfy us that such a shortfall regarding preferential creditors exists.

When taking control or distraint is completed by sale more than 3 months before the making of the bankruptcy or winding-up order we are entitled to retain the sale proceeds.

In Scotland, attachment will not be taken against a sequestrated trader for the duration of the sequestration.

14.3 Creditors’ voluntary winding-up, members’ voluntary winding-up, administrative receivership, voluntary arrangements and company administrations

If taking control or distraint has been completed (goods in possession of HMRC, either physically or under a Controlled Goods Agreement (England and Wales) or walking possession (Northern Ireland) before the appointment of a liquidator, administrative receiver or administrator, then the distraint or attachment remains valid and will be maintained and may be completed (read paragraph 14.3.3).

14.3.1 Voluntary arrangements

Taking control or distraint action will normally be suspended once an interim order has been made, a moratorium granted or proposals for a voluntary arrangement have been received and a creditors meeting arranged unless there are exceptional circumstances which justify not suspending, for example evidence of fraud or lack of probity.

When a controlled goods agreement or walking possession has been entered into, our support for a proposal is likely to be on terms such that the element of our claim equivalent to either the value of that claim or the agreed valuation of the controlled goods (whichever is lower) shall be a priority claim in the arrangement.

When the proposals are rejected at the creditors’ meeting we will proceed to complete the seizure by sale.

14.3.2 Administrations

Once an administrator has been appointed, taking control or distraint may not be instituted or continued against the company or the property of the company except either with the:

• consent of the administrator
• leave of the court

Although, in view of the special rights taking control or distraint gives us over the seized goods, we will generally try to reach a financial settlement with the administrator without the need to seek court directions. The process of ‘binding goods’ under TCEA07 by issuing an enforcement notice considerably strengthens HMRC’s position in this respect.

14.3.3 Sale of controlled or distrained goods

In many cases we’ll agree to the office holder selling the seized goods if it is likely to be to our benefit and, or to the creditors in general. This is subject to the office holder providing us with a written undertaking to remit the proceeds of the sale of the seized goods directly to us.

We reserve the right to remove and sell controlled or distrained goods at any time.

Any money we receive for the sale of controlled or distrained goods will be set against costs and then against the earliest pre-insolvency liability, with our claim amended accordingly.

14.4 Floating charges

When a floating charge crystallises on the appointment of an administrative receiver or some other event specified in the debenture, control or distraint will still be maintained and completed if we have already seized goods which are subject to the floating charge.

We may choose to let the administrative receiver sell the goods, subject to an undertaking, and pass the proceeds to us (read paragraph 14.3.3).

15. Partial exemption

15.1 When is a business partly exempt

If a business is registered for VAT and incurs input tax relating to exempt supplies, that business is partly exempt. This means that it may not be able to claim all the input tax it incurs and that it will normally have to use a partial exemption method to work out how much input tax can be claimed.

You can find more information about partial exemption and methods of calculation in Partial exemption (Notice 706).

Partial exemption requirements apply to all VAT traders including those which are insolvent or in receivership or administration.

As office holder you must comply with these requirements in respect of any returns you complete for pre or post relevant VAT periods.

An insolvent business may seek approval from its local VAT office for a change of method to calculate its entitlement to input tax recovery, given the change in circumstances.

We will apply its normal policy, as set out in paragraph 6.11 of Partial exemption (Notice 706), to when any new method can apply from with the exception that the method cannot be applied to any pre-insolvency returns.

15.2 Annual adjustments for insolvent businesses that are partly exempt

When a business is already partly exempt it may seek approval from us to end its current tax year at the relevant date and to make its annual adjustment in the VAT period ending with the relevant date. Such applications should be clearly marked ‘VAT partial exemption query’ and sent to the VAT Written Enquiries Team:

If we do not allow approval for a change, the annual adjustment is to be made in accordance with the normal rules set out in Partial exemption (Notice 706).

15.3 Insolvent traders and the Capital Goods Scheme (CGS)

If the insolvent business had assets covered by the Capital Goods Scheme (read Capital Goods Scheme (Notice 706/2)) then those assets pass to the office holder on insolvency. If the use of the assets changes whilst under the office holder’s control then adjustments may arise, which must be declared on returns due from the office holder.

The office holder will need to establish this information:

• what assets covered by the CGS are held
• when they came into use in the business
• how much input tax was initially incurred and deducted on them

15.3.1 Asset still used within the business

Any adjustments are likely to be modest as they will only address the time of use by the office holder and the difference between their use and that originally made by the business prior to insolvency.

If the office holder brings the company out of insolvency or sells its assets as a transfer of a business as a going concern then any CGS items will pass on to the new owners at that point.

15.3.2 Assets no longer used within the business but held for eventual sale

If the original use was taxable and the sale will be exempt then there may be substantial adjustments due. As the sale will be made by and under the direction of the office holder adjustments must be declared by them on returns that they submit.

If the asset is a building then it may be possible to prevent the sale from being exempt by opting to tax (read Opting to tax land and buildings (Notice 742A)), although this may restrict what buyers may be interested.

If the original use of the assets was partly exempt, and if the sale is to be taxable, then adjustments in the office holder’s favour may arise.

If the business cancels their VAT registration without a sale of the asset taking place then an adjustment may arise at that time.

15.4 Insolvent traders’ circumstances which may be affected by partial exemption

15.4.1 Insolvent business formerly fully taxable or treated as fully taxable continuing to trade

When a business remains fully taxable or continues to be treated as fully taxable, the input tax on the office holder’s fees, and all other overheads, will be recoverable.

When the business carries on trading and becomes partly exempt, it will have to apply a partial exemption method in the normal way. Recovery of input tax, including that on the office holder’s fees, could be subject to restriction in accordance with the partial exemption method used.

15.4.2 Insolvent business formerly partly exempt continuing to trade

When the business remains partly exempt, recovery of input tax, including that on the office holder’s fees, could be subject to restriction in accordance with the partial exemption method in place in the normal way.

You should request a change of method from your local VAT office if, due to changing circumstances, the method in place no longer produces a fair and reasonable attribution of input tax to taxable supplies.

15.4.3 Insolvent business which was fully taxable, or formerly treated as fully taxable, ceases to trade but remains registered pending sale of assets

When the business has ceased to trade, the principal activity will be the sale of assets.

If the assets which are sold are exempt, the business may become partly exempt. Any input tax relating to the sale of the exempt assets would then need to be restricted according to a method. But the office holder’s fees should be treated as an overhead to the business prior to insolvency and, since that was fully taxable, they’re fully recoverable subject to the separation of any third party costs.

15.4.4 Insolvent business, which was partly exempt, ceases to trade, but remains registered pending sales of assets

When the business has ceased to trade, the principal activity will be the sale of assets.

Recovery of input tax is subject to restriction in accordance with the partial exemption method which is in place in the normal way. But the office holder’s fees should be treated as an overhead of the business prior to insolvency and, since that was partly exempt, they will be subject to restriction.

The business should continue to use the method in place in the normal way.

A change of method should be requested from the local VAT office if, in the light of changing circumstances, the method in place no longer produces a fair and reasonable attribution of input tax to taxable supplies.

15.4.5 Insolvent business that have cancelled their VAT registration

VAT is only recoverable on services which, although supplied after the registration was cancelled, relate to former taxable supplies made by the business.

16. Partnerships

16.1 How we deal with partnerships

When a partnership becomes insolvent, we may pursue any of the partners for any liability due.

16.2 All partners insolvent

We will lodge one claim with the insolvency practitioner in the name of the partnership. This claim should stand in the joint estate and separate estates of all the insolvent partners. We should therefore be included in any dividend declared in any of the insolvent estates.

16.3 One or more partners remain solvent

Responsibility for submitting and paying returns remains with the solvent partners.

We may lodge a claim with the office holder of the estate of the insolvent partner for any debts accrued up to the date of insolvency.

If you have tax to account for on the administration of the insolvent estate you must not account for it on the solvent partner’s return. We will issue forms to you on request to allow you to account for the tax direct to us.

16.4 Partnership wound up but individual partners remain solvent

The office holder will be treated as the taxable person with effect from the date of the winding-up. They will be responsible for submitting and paying any tax due on returns for the period after the date of winding-up.

A claim will be lodged with the office holder in the name of the insolvent partnership for any liabilities due to us up to the date of winding-up.

16.5 Insolvent partners with different relevant dates

We will lodge individual claims in the individual estates of the partners calculated from their respective relevant dates.

17. Law of Property Act

17.1 Receivers appointed under the Law of Property Act 1925

When a receiver is appointed under the Law of Property Act, the receiver is unable to register separately for VAT as they’re appointed under a legal charge and are deemed to be the agent of the VAT-registered business. This business retains responsibility for its own VAT registration, and all taxable supplies made and expenditure incurred by either it or the receiver must be accounted for on the VAT Return for the business’ registration.

17.2 Option to tax

You should ask the VAT office which controlled the business to confirm if an option to tax has been taken out on the land or building.

You will need to supply a valid VAT registration number to obtain this information and if the business has opted to tax, any supplies of the land or building will normally be standard rated.

You can find more information in Opting to tax land and buildings (Notice 742A).

17.3 Accounting for VAT

We consider that:

Law of Property Act receivers making third party payments to us in respect of the management of specific properties are discharging their obligations under the Law of Property Act. This obligation is limited to accounting only for the net amount that would be due from the borrower. It is therefore acceptable for receivers to calculate that net amount by reference to any VAT credit that the borrower is entitled to claim in connection with the supply. But as the payment made on account by these receivers is simply made on behalf of a borrower, the borrower is still obliged to submit a VAT Return stating their liability, including the credit for any input tax. In VAT account terms, the borrower must then pay the amount owed, taking into account anything already paid by the receiver.

The Law of Property Act receiver should account for the net tax calculated by means of form VAT 833.

The Law of Property Act receiver’s duty in relation to VAT is limited to accounting for tax received. It is not part of the receiver’s obligations under the Law of Property Act to obtain repayments of VAT in connection with the property, nor does he have any legal right, under either the Law of Property Act or VAT legislation, to make such a claim. While we accept that the receiver can reduce the amount of VAT to be accounted for by setting off any VAT credit that the borrower is entitled to claim in respect of that supply, if this results in a repayment claim then it is the responsibility of the borrower to claim on their VAT Return.

If assets are sold, then the VAT due must be accounted for and paid to us using form VAT 833. The business’ VAT registration number should be used on sales invoices and quoted on form VAT 833.

Payment may be made electronically, with the exception of card payments using the online or phone payment service and online direct debit.

Use these details:

• electronic payment to the CITI MISC Account, sort code: 08 32 00, account number: 12000903
• reference to quote CAT2 V833 and then the VAT registration number

Law of Property Act receivers cannot make a separate claim for the input tax which should properly be claimed viathrough the trader’s VAT Return.

18. Transfer of a business as a going concern (TOGC)

18.1 The implications of a TOGC

There may be a TOGC if the assets of the business are transferred to a different legal entity when they continue to be used in the same type of business as that of the transferor.

18.2 How office holders may apply for a TOGC

An office holder may treat the transfer of the assets of a business as not being a supply when the business is transferred as a going concern and the transfer can meet the criteria set out in Transfer of a business as a going concern (Notice 700/9).

19. Retention of insolvent trader’s records

19.1 How to keep books, papers and records

The liquidator may destroy the books, papers and records, including the VAT records, of the insolvent company 1 year after the date of dissolution of the company.

A concession has been granted to official receivers to allow them, on request and with our approval, to destroy the books and records of a company after 6 months.

Normal rules for retention of records apply to other insolvencies.

20. VAT group registrations

20.1 What a VAT group registration is

A VAT group registration allows 2 or more companies or limited liability partnerships, known as ‘bodies corporate’, to account for VAT under a single registration number.

20.2 How VAT group registration works

The group is registered in the name of the representative member, who is responsible for completing and submitting the single return on behalf of the group. Whilst the representative member is responsible for paying the VAT or receiving any repayment due, all the group members are jointly and severally liable for VAT debts incurred during the period of their membership.

20.3 The criteria for VAT group membership

Only corporate bodies established, or with a fixed establishment, in the UK can be members of a VAT group. Such corporate bodies must also satisfy the control condition.

20.4 The control condition

The control condition is that all members of the group are controlled either by one member of the group or a single other ‘person’ who is not one of the members of the group. That person can be a body corporate, an individual or a partnership. That person is known as the controlling body.

20.5 Where to find out more about VAT group registrations

More information can be found in Group and divisional registration (Notice 700/2).

20.6 The impact of insolvency on existing VAT groups

20.6.1 Insolvency of the controlling body

If a controlling body for a VAT group registration becomes insolvent, an insolvency practitioner is appointed. In such circumstances, the VAT group registration does not need to change, unless the controlling body ceases to meet the control criteria as set out in the VAT Act 1994 s43A and 43AZA.

The control, which must be exercised in order fulfil this condition, is set out section 1159 of and Schedule 6 to the Companies Act 2006. 

For more information read Group and divisional registration (Notice 700/2).

20.6.2 Insolvency of a group member

If an insolvency practitioner has been appointed over any VAT group member other than the controlling body, it may remain in the VAT group with effect from the date the insolvency practitioner is appointed, as long as the group continues to meet the control conditions as set out in the VAT grouping rules set out in the VAT Act 1994 s43A and 43AZA.

The control, which must be exercised in order fulfil this condition, is set out section 1159 of and Schedule 6 to the Companies Act 2006. For more information, read paragraph 2.9 in Group and divisional registration (Notice 700/2).

If the VAT grouping control conditions for the group member are no longer met, then the entity should be registered for VAT separately. If the insolvent group member being removed is the representative member, it will be the responsibility of the VAT group to nominate a new representative member and inform us accordingly.

The joint and several liability of VAT groups will be unaffected by this change. Each member of the VAT group will continue to be jointly and severally liable for any VAT debts.

For more information, read the VAT groups manual VATGROUPS01500: liability of VAT group members.

21. Submission of VAT forms

21.1 Where do I send VAT forms

New style VAT100 2021 VAT Returns

VAT7 — Applications to cancel your VAT registration

VAT426 — Insolvent traders claim for input tax after deregistration

VAT427 — Claim for input tax relief from VAT on cancellation of registration

VAT50-51 — Apply for VAT group registration or amend your details

VAT 769 — Notification of insolvency details for bankruptcies

VAT 769 — Notification of insolvency details for compulsory liquidations, creditors voluntary liquidations and members voluntary liquidations

VAT 769 (Scotland and Northern Ireland) — for sequestrations, trust deed and receiverships (excluding members voluntary liquidations)

VAT 769 (Cardiff) — company administration and voluntary arrangements

22. Funded pension schemes

When a company is being wound up, VAT is deductible on supplies under section 94 of the VAT Act 1994 if the company:

• still exists as a legal entity
• is still receiving supplies for which it’s liable for VAT

This includes VAT on costs incurred in winding up the company’s occupational pension scheme.

The company can reclaim the balance of the VAT deductible on these supplies for the relevant period if this is more than the tax the company owes us for that period. Claims are made through its insolvency practitioner.

You can find more information in Funded pension schemes (Notice 700/17).

23. Unincorporated associations and clubs, and payment of Corporation Tax

Insolvency practitioners must take these steps when they’re appointed to an unincorporated association or club (for example, a voluntary group or a sports club):

1. Find out when HMRC will treat clubs and unincorporated organisations as dormant.

2. Write to HMRC to confirm the date of your appointment and to give instructions for us to update the registered office address held with your main address or principle place of business. As an unincorporated association does not need to be registered with Companies House, HMRC will not be automatically notified of your appointment.

3. Use form CT61 to make a return of Income Tax on company payments. You can request CT61 online.

If you have any queries about the CT61, contact HMRC by telephone: 03000 518371.

24. PAYE

24.1 PAYE and National Insurance contributions payments that straddle pre and post appointment periods

Where a payment to an employee covers both pre and post appointment periods, all the Income Tax and National Insurance contributions deducted and due on any payslip issued to the employee after the relevant date of the formal insolvency procedure, should be paid to HMRC as an expense of the insolvency.

A formal insolvency procedure can include:

• in administration
• compulsory liquidation
• creditors’ voluntary liquidation
• bankruptcy
• sequestration

This is described in section 18 of the Income Tax (Earnings and Pensions) Act 2003, it states that PAYE applies at ‘the time the payment is made’ or ‘the time when a person becomes entitled to payment of or on account of the earnings’.

All the income tax and National Insurance contributions due at the time of payment should be returned to HMRC by the employer who made the payments.

For more information, read the Employment income manual EIM42270: employment income: basis of assessment for general earnings: the time when earnings are received: actual payment.

A company’s existing PAYE Scheme should continue to be used for these post-appointment payments. A new PAYE scheme is not necessary.

For more information, read the PAYE manual PAYE21130: Employer records: maintain employer record: insolvency of employer.

24.2 Employment Protection Act (EPA) schemes

24.2.1 Recording tax and National Insurance for former employees of an insolvent entity

There may be times when you need to record tax and National Insurance due on a dividend paid to the former employees of an insolvent entity.

For example: 

• holiday pay
• arrears of pay arising before the date of insolvency
• pay in lieu of notice claims
• redundancy pay

Help us make sure these payments are allocated correctly by setting up a new EPA scheme.

You should:

• contact us to set up the scheme only when you are ready to make the payments
• make sure when making payment that the Accounts Office reference number for the EPA scheme is used to ensure correct allocation of funds
• once the final dividend payment has been made, make sure HMRC receives a final Full Payment Submission (FPS) with a cessation date

This will prevent any reminder or late penalty notices being issued, should the scheme remain open.

24.2.2 How to set up an Employment Protection Act (EPA) scheme

Contact HMRC’s employer helpline.

Tell the adviser you need to set up an EPA scheme.

They will ask you for the following information:

• the name and National Insurance number of directors (if available)
• the phone number and email details of the insolvency practitioner
• the registered office address of the insolvency practitioner
• any other correspondence addresses we may need to note for you
• date of the first pay day
• EIS reference number

Our adviser will then ask some more questions and tell you what you’ll receive and when.

Once the EPA scheme is set up, read PAYE and payroll for employers for guidance on operating PAYE.

24.2.3 Making additional payments

If you need to make additional payments after the final FPS has been submitted, submit another FPS with the revised date of cessation.

This can only be done in either the:

• same tax year as the date of cessation or cancellation
• next tax year after the date of cessation or cancellation

For any other year, a further scheme will need to be set up.

24.2.4 Additional Information

We are still receiving some payments of tax and National Insurance contributions due on these payments where an EPA PAYE scheme has not been set up. This means we’ve been unable to allocate the payments and update the employees PAYE tax and National Insurance contribution records.

If you set up an EPA scheme you must submit an FPS, failure to do so means we’ll be unable to allocate the payments and update the employees PAYE tax and National Insurance contribution records accordingly. We cannot accept this information by letter.

For guidance on this process read PAYE and payroll for employers.

25. Plastic Packaging Tax

Find out how to tell HMRC about insolvency for Plastic Packaging Tax.

26. The Mid-sized Business (MSB) temporary Customer Compliance Manager (tCCM) model 

26.1 What the tCCM team do 

The tCCM team provides temporary one-to-one compliance support to MSB customers with greater complexity, multiple interactions with us and those going through key life events. Once appointed to a customer, the tCCM acts as the nominated point of contact in HMRC. The tCCMs work alongside other Tax Specialists in the department to progress and resolve any tax issues and interventions the business may have. 

26.2 How long a tCCM is allocated 

The length of time a tCCM is allocated differs depending on individual customer needs. A clear exit point will be agreed during the opening discussion with the business and kept under regular review. 

26.3 Businesses which can apply for a tCCM

The tCCM model is for MSB customers,including those subject to insolvency procedures. MSB customers are defined as having a turnover of over £10 million or more than 20 employees. A business may be suitable for a tCCM if they are a mid-sized business and:

• are experiencing considerable difficulties in managing their tax affairs
• are going through key life events
• are experiencing a period of significant growth which requires a number of interactions with HMRC
• have multiple enquiries or tax-related issues across the corporate group
• are new to regulatory regimes (Senior Accounting Officer, Publication of Tax Strategy, Country by Country reporting, and so on) and require additional support

As the team is small, they prioritise allocation of tCCMs and may not be able to provide at CCM to every business who requests one.

26.4 How to apply for a tCCM 

Customers (or their agents) can ask to be considered for a tCCM by contacting the MSB Customer Support Team in Get help with a tax issue as a mid-sized business.

27. Climate Change Levy

Find out how to tell HMRC about insolvency for Climate Change Levy.

Your rights and obligations

Read the HMRC Charter to find out what you can expect from us and what we expect from you.

Help us improve this notice

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If you need general help with this notice or have another VAT question, contact the VAT helpline.

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If you’re still unhappy, find out how to complain to HMRC.

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