Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

Construction Industry Scheme Reform Manual

From
HM Revenue & Customs
Updated
, see all updates

Deductions: SA subcontractors: credit arising to a bankrupt

CISR75600 Action guide contents
   

The treatment of credit arising from deductions suffered by a bankrupt depends on when the deduction was made. The deduction may have been made

  • in the period 6th April to the date of the Bankruptcy Order
  • in the period from the date of the Bankruptcy Order to the following 5th April (existing trade continues)
  • in the period from the date of the Bankruptcy Order to the following 5th April (new trade commences)
  • in the tax year following that in which the Bankruptcy Order was made.

Each of these cases is dealt with below and in the action guide at CISR75610.

Deductions made in period 6 April to date of Bankruptcy Order

Deductions in this period should first be set off against tax and Class 4 NIC on the subcontracting profits provable in the bankruptcy. Any excess credit should then be set off against other provable HMRC debts.

Where further excess deduction remains after this, ask the Enforcement Insolvency Section to check if any other Government Department has a claim against the bankrupt. If not, it should be repaid to the Trustee.

You should remember that Payment and Deduction Statements (PDS’s) may be issued covering whole tax months, so a statement relating to the tax month in which the Bankruptcy Order was made may include payments made before and after the date of the Order. Where a statement relating to the month in which the Order was made is submitted, write to the Trustee asking for the actual dates and amounts of payment making up the total. You should then allocate these payment and deduction figures to periods before and after the date of the Order.

Deduction made in period from date of Bankruptcy Order to the following 5 April (Existing trade continues)

In these cases the deductions are not available to be set against tax and Class 4 NIC provable in the bankruptcy and should be repaid to the Trustee.

Deduction made in period from date of Bankruptcy Order to the following 5 April (New trade commences)

Where the subcontractor commences a new trade, the tax on the profits of the new trade cannot be claimed in the bankruptcy and any deductions may be set against liabilities from the new trade in the normal way. Any repayment resulting from these deductions, which arises before the subcontractor is released from bankruptcy, should be offered to the Trustee first but may be made direct to the subcontractor if the Trustee agrees.

Deduction made in a tax year following that in which the Bankruptcy Order is made

Deductions made in tax years subsequent to that in which the Bankruptcy Order is made may be set against any liabilities which do not figure in the bankruptcy. If repayment arises before the bankrupt’s release, the Trustee should first be asked if they wish to claim it.