Value Added Tax

Insolvency ― responsibility for VAT, notification and returns

Produced by Tolley
  • 02 Nov 2021 08:41

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

  • Insolvency ― responsibility for VAT, notification and returns
  • Who is responsible for a business’ VAT affairs when it becomes insolvent?
  • What VAT notification requirements does the office-holder have on appointment?
  • When is a VAT 769 not required?
  • What is the relevant date of an insolvency?
  • What are the VAT return obligations of office-holders?
  • Pre-insolvency returns
  • Split-period returns
  • Post-insolvency returns
  • Returns for bankrupts continuing to trade
  • More...

Insolvency ― responsibility for VAT, notification and returns

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 VAT notification requirements does the office-holder have on appointment?

The law says that the office-holder has 21 days from the ‘relevant date’ (see ‘What is the relevant date of an insolvency?’ below) to tell HMRC in writing about the insolvency.

This notification allows HMRC both to quantify the VAT element of its insolvency claim and to issue split VAT returns for the pre and post-insolvency period (for which, see below in this guidance note).

HMRC will normally expect the notification to be made using form VAT 769.

Persons appointed as one of the following will have to complete and return a VAT 769:

  1. a trustee in bankruptcy or sequestration of a VAT registered individual

  2. a liquidator of a VAT registered company

  3. a receiver in the administrative receivership of a VAT registered company

  4. an administrator in the administration of a VAT registered company

Notice 700/56, para 3.1

When is a VAT 769 not required?

HMRC states that a

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