SAM106034 - Records: bankruptcy: bankruptcy: SA only record with no PAYE Source (Action Guide)

When you receive formal notification on form INSOL 200 of a bankruptcy order, and the SA record is not linked to a legacy system record, follow steps 1 - 19 below. The guide is presented as follows

Initial clerical action - Steps 1 - 3
Existing pre-bankruptcy SA record - Steps 4 - 9
New post-bankruptcy SA record - Steps 10 - 19

For details of how to access any of the SA functions, select ‘Index Of Functions’ on the left of the screen.

Initial clerical action

1. Prepare an INSOL 100 sub-folder to hold the bankruptcy papers

Note: Partnership and partners: It is an anomaly in the Court system that allows more than one person to be made bankrupt (for example, multiple partners) and to wind up a partnership in the same hearing. This means that all of the partners and the partnership could have the same court reference. ICHU will give each partner a separate ICHU reference. Partners are dealt with the same way as individuals

2. Issue form INSOL 103 to the Official Receiver or trustee in bankruptcy. If the bankrupt taxpayer is a subcontractor you must send a copy of the BY notification to the centralised CIS Team in Newry at: CIS Newry, Custom House, Carnbane Way, Carnbane Industrial Estate, Newry BT35 6QG

3. Send a copy of INSOL 200 to

  • The office with processing responsibility (Employers Section) who have responsibility for the employer PAYE scheme , if the taxpayer is an employer who will deal with the cessation of any PAYE scheme

Existing pre-bankruptcy SA record

4. Use function AMEND TAXPAYER SIGNALS to enter

  • Insolvency details
  • Solvency Status ‘Insolvent’
  • Insolvency Reference, using the pseudo reference BY0000/11 (BY0000/12 for 2012 and so on)
  • Relevant Date

5. Use TBS function AMEND CAPACITY DETAILS to cease any existing live capacity details

6. Use SA function SET UP CAPACITY DETAILS to enter details of the Official Receiver or trustee in bankruptcy as main capacity on the SA record. In Scotland ‘Other’ should be selected from the drop down menu and ‘Permanent Trustee’ entered in the Free Format Notes field (‘Trustee in Sequestration’ is not available in the drop down menu, and neither can it be entered in the limited space available in the notes field)

7. Use SA function AMEND TAXPAYER’S AGENT DETAILS to remove the agent details from the record and make a note of the agents details to update the post-bankruptcy record, where appropriate (see step 14). Make an SA Note of your actions

8. Use function AMEND TAXPAYER SIGNALS to

  • Enter the end of the year in which the bankruptcy order is made in the Last SA Return Required For Year Ending 5th April field, for example ‘12’
  • Set the Manual Return signal to ‘Y’, if today’s date falls between 6 April and the date of the automatic selection process for returns issue. (Note: The return is to be issued to the taxpayer, not the trustee / Official Receiver)
  • Where the annual selection process has already taken place before the Manual Return signal is set, as ‘BY Year’ returns must be captured using Local Data Capture (LDC), you must write to the taxpayer using OCA letter OCABY09 (or OCABY12 where Voluntary arrangement, a Trust deed or Sequestration applies)

Note: Where the taxpayer is bankrupt and is also now deceased, the guidance remains the same. Issue OCADBY09 if the deceased was bankrupt or OCADBY12 if the deceased had entered into a voluntary arrangement, trust deed or sequestration. Do not issue the letter until you have reviewed guidance at step 12 below

Note: In a deceased case a manual SA100 should be reviewed guidance at step 12 below

  • Enclose a manually issued form SA200, noted ‘BY Year’
  • Explain that it is too late to stop the automatically issued tax return and that it should be ignored. Add that the enclosed SA200 should be completed in its place and returned to the issuing office
  • Set the No Repayment signal to ‘Y’, to stop any overpayment being repaid automatically
  • Update SA Notes fully to show the national insurance number and the position and confirm that a manual return for the year of bankruptcy needs to be completed. An online return cannot be completed for the year of bankruptcy. This UTR is only for the year up to the year in which the bankruptcy occurred

9. If you are dealing with a case in which the Official Receiver is the trustee, inhibit the statement following the advice in Action Guide ‘Request Inhibition of Statement’ (SAM131031) before the next statement is issued

Note: Where the Official Receiver (Insolvency Service) requests information in respect of a bankruptcy case, you should also send a manual statement

  • Follow the advice in Action Guide ‘Request Inhibition of Statements’ (SAM131031)
  • The statement inhibition should not be removed until 3 years following the tax year shown in the ‘Last SA Return Required’ field on the ‘Individual Signals’ page and there is no outstanding liability, or unallocated credits, on a statement. For example, at 6 May 2012, the Last SA Return Required field shows ‘10’ or earlier

Notes:

a. Where a customer is registered for online services, the noting of ‘Official Receiver’ in the capacity details automatically de-enrols them from online services. If the customer registers again, the activation code is sent to the Official Receiver who then returns it to the Online Services team. If the customer contacts us, you should advise them that the bankruptcy year should be dealt with by completion of a manual return and they cannot file online. If they wish to file online for years following bankruptcy, they should re-register using the new post bankruptcy UTR

b. Where the trustee is not the Official Receiver only inhibit statements where the trustee makes such a request

New post-bankruptcy SA record

10. After updating the pre-bankruptcy SA record with the capacity details you must wait overnight and check TBS. The TBS record must show that SA is dormant for you to continue with the steps below. If the TBS record does not show the SA record as dormant you cannot continue to set up a post-bankruptcy SA record. You must wait until it shows SA dormant

Note: Not all cases will need a post-bankruptcy SA record. his record will only be for cases that continue to fulfil SA criteria in that they continue in the trade / business / partnership they were involved in prior to bankruptcy or they commence a new business / trade / partnership. If form CWF1 / SA1 is received following bankruptcy for a new source of income, these can be set up using SET UP POST BY / VA INDIVIDUAL. This will ensure all correct information is transferred from the pre-bankruptcy record to the post-bankruptcy record

11. Once the pre-bankruptcy SA record is shown on TBS as dormant, use function SET UP POST BY / VA INDIVIDUAL to create a new SA record for the taxpayer

Note: Post VA records should only be set up by VAS (Voluntary Arrangement Service). For further information see SAM106120

You must use this function to set up a post-bankruptcy SA record. Once the UTR from the pre-bankruptcy record has been input, this function will

  • Automatically populate the post-bankruptcy record with data from the pre-bankruptcy record, including
  • Name, address and date of birth
  • NINO
  • Return details and signals

Note: The data and values on the screen can be amended at this stage

  • Automatically set the SA Entry / Exit Letter Inhibited signal to ‘Y’
  • Automatically store the UTR of the original record on the on-going SA record, and store the UTR of the on-going SA record on the original SA record

12. Use function SET UP POST BY / VA INDIVIDUAL to

  • Set the ‘Manual Return’ signal to ‘Y’ for the year of bankruptcy. For example, if bankrupt in 2011-12 set the signal for that year and make the SA Note
  • ‘Manual Return signal set. Return for XX-XX not required as cleared on pre-BY record. Remove signal after 5 April XX, the end of the BY year’
  • This message can be found by selecting SEES, Notes Paster and under the ‘Returns’ category, selecting the message ‘Bankruptcy - Man Ret signal’
  • However if today’s date falls after the automatic selection process there is no need to set the ‘Manual Return’ signal. You will not need to issue a return from this record for the year of bankruptcy (the return is to be issued from the bankruptcy record rather than new record)
  • Enter Communications Address details, where necessary, before using function MAINTAIN RETURN PROFILE
  • Enter new capacitor’s details, where necessary, before using function MAINTAIN RETURN PROFILE (the new capacitor will not be the Official Receiver as this is a post-bankruptcy record). Note: The ‘Abroad’ indicator cannot be set if a postcode is present
  • Issue OCA letter OCABY09 (or OCABY12 where Voluntary arrangement, a Trust deed or Sequestration applies)

Note: Where the taxpayer is bankrupt and is also now deceased, the guidance remains the same. Issue OCADBY09 if the deceased was made bankrupt or OCADBY12 if the deceased had entered into a voluntary arrangement, trust deed or sequestration

  • Use the ‘Return Profile’ button to access function MAINTAIN RETURN PROFILE to record the supplementary pages to be issued with the basic return

Note: The information will flow overnight to the Citizen Identification (CID) Framework. If there is a current PAYE main source record a link will be created automatically between the SA record and the PAYE record

13. Where the source of income received is income from property

  • Enter a free format note in function AMEND TAXPAYER SIGNALS

14. If an agent was previously acting according to the pre-bankruptcy record, a new 64-8 is not required for this agent to be set up on the post-bankruptcy record. You cannot assume that following bankruptcy the agent no longer acts so you must use the same agent details on the post-bankruptcy record; unless you have been informed by either the taxpayer or the agent that they are no longer acting

15. Where there is a new agent acting and a new 64-8 has been received send to CAAT in accordance with SAM100200 for them to process

16. Where the individual taxpayer continues to have trading profits including profit from a profession or vocation (excluding a partnership trade source, which must be set up on the partnership record)

  • Use function SET UP TRADE, once for each trading source you want to set up. If the taxpayer has more than one trade / partner source, set up the main source first. Alternatively, where the SA record is not linked to PAYE, you can access function MAINTAIN SOURCES to nominate the main source
  • If the source is within the construction industry
  • Use function MAINTAIN COMPLIANCE SIGNALS to enter on the SA record the nature of the taxpayer’s involvement in the construction industry

17. Where the taxpayer continues to be a partner

  • Use function SET UP PARTNER, once for each partner source you want to set up (this creates a link between the individual taxpayer record and the partnership records)
  • And where the SA record is not linked to PAYE
  • Use function MAINTAIN SOURCES to nominate the main source, if the taxpayer has more than one trade / partner source and you did not set up the main source first

Note: You should show the date of commencement as 6 April in the year following the year of bankruptcy

Where the taxpayer commences a new business / partner in a partnership post-bankruptcy form CWF1 / SA401 / SA402 should be completed and dealt with by CAAT in accordance with SAM100200

18. Where the taxpayer is responsible for operating Class 1 NIC on a DC source of PAYE income, ask the Employers Section to

  • Open a Direct Collection (Employee Only NIC) scheme
  • Issue the information pack as detailed in the PAYE Manual

19. Where the taxpayer has indicated the requirement for special output, set the relevant signal that is Audio, Braille or Large print. For Welsh Language cases only contact HMRC Welsh Contact Centre, Ty Moelwyn, Porthmadog, Gwynedd, LL49 9AB or WAM box 906

Note: Do not create payments on account for the year of bankruptcy on the new SA record. Any payments on account due for the year of bankruptcy exist on the old SA record. Adjustment to the payments on account for the year of bankruptcy (old SA record) and any payments on account due for the following year (new SA record) will be sorted out on receipt of the return for the year of bankruptcy