HM Revenue and Customs Brief 13/14
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Issued 6 April 2014
VAT: deregistration of insolvent businesses
HM Revenue & Customs (HMRC) has in the past allowed
insolvency practitioners to cancel the VAT registration of the business
they have been appointed over at an early stage and account for VAT on
any subsequent supplies using form VAT 833 Statement of Value Added Tax
on goods sold in satisfaction of a debt. As part of a review of this
process, HMRC has received legal confirmation that a deregistered
business can no longer issue a valid VAT invoice. This could result in
VAT registered buyers of assets from insolvent businesses being denied
claims for input tax on the purchase of the assets in question.
Consequently, HMRC can no longer allow such 'early' deregistration of
Even though trading may have ceased, VAT legislation requires
a business to register and remain registered for VAT if that business
is making taxable supplies above the VAT registration threshold.
'Taxable supplies' in that context would include asset realisations by
an insolvency practitioner. Consequently, HMRC will now keep insolvent
VAT registrations open until all trading has ceased and all assets are
realised (though an insolvent business has the same right as any other
business to apply to deregister on the grounds that it is continuing to
trade but below the VAT registration threshold, if that situation
applies). Insolvency practitioners are required to render VAT returns
and appropriate payment, if any, for each VAT period until the
HMRC is happy to work with insolvency practitioners to resolve
any difficulties which may arise from this approach, particularly in
cases where all trading has ceased but the insolvency practitioner is
experiencing difficulties in selling a property on which there is an
option to tax. Insolvency practitioners should discuss any such cases
with the National Insolvency Unit in Liverpool.
The National Insolvency Unit Helpline may be contacted on
03000 540 808.
The Helpline is available from 8.30am to 5pm Monday to Thursday and
8.30am to 4pm on a Friday.
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© Crown Copyright 2014.
A licence is needed to reproduce this article and has been republished
for educational / informational purposes only. Article reproduced by
permission of HM Revenue & Customs.
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Article Published/Sorted/Amended on Scopulus 2014-04-09 09:10:30 in Tax Articles