Insolvency – administering an insolvent business

By Tolley

The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Insolvency – administering an insolvent business
  • Submitting VAT returns
  • Penalties
  • Cancelling the VAT registration
  • Accounting for output tax
  • Recovering input tax after a VAT number cancelled
  • Paying a dividend
  • Bankrupts
  • Bad debt relief (BDR)
  • Cash accounting
  • Credit notes
  • Addresses where forms should be submitted

This guidance note provides an overview of how an office holder needs to deal with the VAT compliance issues that relate to a business that is insolvent. This note should be read in conjunction with the Insolvency – introduction guidance note.

HMRC Notice 700/56 ; INS1000
Submitting VAT returns

All VAT returns regardless of whether they are pre or post appointment need to be sent to the following address:

VAT Controller
VAT Central Unit

The office holder must not amend any information already shown on the form such as the return dates, trader's name, etc. Photocopies of the return cannot be accepted by HMRC. Currently there is no requirement for an office holder to file the VAT return electronically and paper returns are still used in respect of insolvent businesses.

The insolvent business is required to submit any pre appointment VAT returns. However, the office holder can submit any outstanding returns due for the pre appointment period if this is preferable. If the office holder elects to render any pre appointment returns then they must be submitted unsigned and the following narrative should be added to the form:

“completed from the books and records of the company / trader”

HMRC will issue a final pre appointment VAT return that will cover the period up to the relevant date to the office holder automatically. The final return is not subject to the default surcharge.

Split periods

If the relevant date occurs in the middle of a VAT return period and no VAT liability has been declared, two VAT returns will be issued by HMRC:

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