CISR18100 - The Scheme: miscellaneous: bankruptcy cases involving partners

| CISR18600 | Action guide contents | |—————————————————————————————————–|———————–|

The bankruptcy of an individual partner, where the other members of the firm are not insolvent, does not immediately affect the entitlement of the individual or other partners to hold gross payment status on behalf of the firm. Where, however, this event leads to the dissolution of the partnership, this represents a cessation of the firm.

Where a bankrupt remains a partner in a continuing partnership and holds gross payment status on its behalf, they may continue to retain that status until such time the ongoing compliance checks may change the situation.

The outcome of any subsequent ongoing compliance checks will depend on whether, for the relevant ‘qualifying period’

  • all tax on profits from the partnership, as chargeable on the respective partners, has been paid on time - if not, all the partners will fail. FA04/SCH11/Part2/Para 8(1).
  • all other tax obligations imposed on this partner have been met - if not, this partner will fail but the other partners may retain gross payment status. FA04/SCH11/Part1/Para 4(1).

It follows that if tax on partnership profits is included in bankruptcy proceedings, and that tax was imposed within the ‘qualifying period’, and remains unpaid when an application for gross payment status is made by any member, that application cannot succeed.