Insolvency and your VAT

If you or your business becomes bankrupt or insolvent, your insolvency practitioner will usually cancel your VAT registration and organise payment of your VAT.

HM Revenue and Customs (HMRC) will work out your final VAT bill based on what you owe up to the day before insolvency.

They’ll send a paper version of the VAT Return - this can’t be completed using your online VAT account. It must not be signed, instead you or the insolvency practitioner should write:

‘Completed from the books and records of [name of the company/trader].’

Exceptions

You’re still responsible for your VAT if you:

  • are declared bankrupt and continue to trade
  • set up a voluntary arrangement to pay off your debts (sometimes known as a ‘trust deed’ in Scotland)

If you set up a voluntary arrangement, HMRC will send you 2 paper VAT Returns. These are for the following periods:

  • your current VAT period up to the day before the arrangement
  • the date of the arrangement up to the end of your next VAT period

After this, you can continue to use your online VAT account to send your VAT Returns.

You must send any VAT Returns that weren’t done before you became insolvent to the HMRC VAT Controller. Your insolvency practitioner may do this for you.

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