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HMRC internal manual

Construction Industry Scheme Reform Manual

The Scheme: miscellaneous: bankruptcy and applications for gross status


CISR18600 Action guide contents

The mere fact of bankruptcy has no special impact on a bankrupt subcontractor’s entitlement to retain gross payment status. Such an application stands or falls on whether they satisfy the qualifying conditions at the time of application. Among these, of course, is the requirement that all tax obligations arising in the qualifying period must have been fulfilled and on time. Where, therefore, HMRC arrears figure in the proceedings, and the liability involved arose within the qualifying period under consideration, the application fails the compliance test.

One outcome of proceedings in which HMRC arrears figure is that the individual is eventually relieved of the duty to pay these sums and the tax is treated as a Revenue Loss. You should note that this is the institutional recognition that the debtor is unable to meet their financial liabilities. It does not represent the positive discharge of tax obligations which is what is required to satisfy the compliance test.