4. Claims

How HMRC issue claims to insolvency practitioners, and how VAT penalties and interest apply.

4.1 Calculation of claims

Once notified that a VAT-registered business has become insolvent, we will calculate our claim based on the amount outstanding at the date on which the business became insolvent. You can get a more detailed breakdown of the claim from the issuing office.

4.2 Relevant date

The relevant date is the date which establishes our claim in the insolvency. The claim will include VAT up to the day before the relevant date.

When the business continues to trade, the office holder will have responsibility for the VAT affairs of the business from the relevant date onwards. Exceptions to this are:

  • bankrupts continuing to trade
  • voluntary arrangements
  • deeds and schemes of arrangement
  • county court administration orders

4.3 Amended claims

We will issue an amended claim if there are any adjustments made to the insolvent trader’s pre-appointment VAT account which affect our original claim.

The amended claim liability will supersede the original claim notification.

4.4 Tax assessments

If a VAT Return has not been submitted for any VAT accounting periods falling before the relevant date, the tax liability for the periods may be assessed by a computer calculated assessment.

We may withdraw this type of assessment once an acceptable VAT Return has been submitted.

If you require a duplicate return you should contact the appropriate HMRC insolvency team for the insolvency type concerned using the contact details in section 1.4. We reserve the right to verify the accuracy of any returns received.

Assessments relate to individual prescribed accounting periods. They’re normally issued as the result of:

  • under or over declarations of VAT discovered during an inspection of the VAT records
  • the best available means in the absence of records
  • a declaration by the trader

Each assessment line corrects the liability previously declared or assessed for the relevant accounting period.

Error correction notifications (formerly known as voluntary disclosures) by the registered trader, or by the insolvency practitioner, of amounts which have been under or over declared follow the same pattern.

Subject to time limits we have the right to assess the tax liability for any period when a return has not been submitted or if there’s evidence that tax is due.

4.5 VAT penalties and interest

You can find information on default interest for VAT in Default interest (Notice 700/43).

Interest is also chargeable on assessments and voluntary disclosures for:

  • Air Passenger Duty
  • Insurance Premium Tax
  • Landfill Tax
  • Climate Change Levy
  • Aggregates Levy

4.5.1 Civil penalties or criminal penalties

Civil penalties can be raised for various reasons including:

  • late notification of a liability to be registered
  • inaccuracies on taxpayer’s returns or documents
  • breaches of regulations
  • dishonesty

Criminal penalties can also be raised if a criminal offence is committed. These penalties will be raised by the courts and will not be included in our insolvency claim.

4.6 Penalty interest

Penalty interest can also be charged for late payment of:

  • Landfill Tax
  • Climate Change Levy
  • Aggregates Levy returns

It’s also chargeable on:

  • tax or levy assessments
  • penalties
  • interest
  • penalty interest in relation to Landfill Tax, Climate Change Levy and Aggregates Levy

4.7 Proof of debt

In bankruptcies and compulsory liquidations the office holder can request a proof of debt from the Enforcement and Insolvency Service. You can find the relevant addresses in section 1.4.