V5.187 VAT debts—insolvency, bankruptcy and winding up
A business becomes insolvent when it has insufficient assets to cover its debts, or is unable to pay debts as they fall due. In such cases, the official receiver or an insolvency practitioner may be appointed to handle the affairs of the business.
VAT debts in insolvency, etc; person carrying on the business
If a taxable person becomes 'bankrupt or incapacitated', HMRC may treat any person carrying on the business as a taxable person from the date of the bankruptcy or incapacity until either some other person is registered in respect of the taxable supplies made (or intended to be made) by that taxable person or the incapacity ceases (see V1.209)1. Any person carrying on the business must notify HMRC in writing within 21 days of2:
• the nature of any incapacity and the date on which it began, and
• the date of any bankruptcy order
The VAT provisions apply to any person treated as carrying on the business as though he were a registered person.
Where any person becomes bankrupt or incapacitated and control of his assets passes to another person, that other person must, if HMRC requires and so long as he has control, comply with the general accounting, record and payment requirements of VAT. However, any requirement to pay VAT only applies to the extent of the assets of the incapacitated person over which he has control so that he is treated to that extent as if he were the incapacitated
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