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HMRC internal manual

Enquiry Manual

Interest: Bankruptcy and Liquidation

Interest under the Taxes Acts or VAT Acts ceases to run when a taxpayer becomes bankrupt or an insolvent company goes into liquidation (see s. 322(2) IA 1986 and Rule 4.93(1) Insolvency Rules 1986 respectively).

If there is a surplus after paying all expenses and claims in bankruptcy or liquidation there is separate provision in the Insolvency Act for all creditors to be paid interest from the relevant date to the date of payment at the judgment interest rate, to the extent of the available funds; see INS7433 and Insolvency Act 1986 Section 189 in a liquidation, Insolvency Act 1986 Section 328 in a bankruptcy & The Bankruptcy (Scotland) Act 1985 Section 51(1) in a sequestration.

Further advice should be sought from DMB, Process and Strategy.