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HMRC internal manual

Information Disclosure Guide

Sharing information outside of HMRC: disclosure in insolvency cases: enquiries from a trustee in bankruptcy

A trustee in bankruptcy is appointed upon an individual being declared bankrupt The trustee may either be from the private sector or may be the Official Receiver (see IDG40620).

Disclosure of confidential information to a trustee in bankruptcy can be split into:

Pre-bankruptcy affairs

i. Where there are outstanding pre-bankruptcy affairs

In the common situation where pre-bankruptcy tax affairs have not been settled (i.e. where HMRC has a claim in the bankruptcy or may owe the bankrupt some money) you must deal with the trustee in bankruptcy and not the bankrupt. You may only deal directly with the bankrupt if you have the consent of the trustee to do so.

This is because only the trustee has the power to finalise outstanding pre-bankruptcy tax affairs with HMRC. You may therefore provide the trustee with information about the bankrupt’s pre-bankruptcy tax affairs so that the outstanding tax liabilities may be settled.

It is important to bear in mind that the trustee does not ‘stand in the shoes’ of the bankrupt for all purposes to the exclusion of the bankrupt. The trustee should be treated as the third party and information should not be provided to him/her about the tax affairs of the bankrupt in the same was that you would have been able to provide that information to the bankrupt before the bankruptcy occurred. For each case you should therefore consider whether the disclosure is necessary, relevant and proportionate before making it.

ii. Where the pre-bankruptcy tax affairs have been settled

It there are no outstanding issues between HMRC and the bankrupt for the period prior to the bankruptcy you may only disclose information to the trustee in bankruptcy if you have the consent of the bankrupt to do so or if the trustee has produced a Court Order.

There may be occasions where HMRC considers the bankrupt’s pre-bankruptcy tax affairs to be settled but the bankrupt tries to re-open them by contacting HMRC direct (even though a trustee in bankruptcy has been appointed). If this happens you may not deal with the bankrupt directly. The only person able to settle outstanding tax affairs with HMRC is the trustee, not the bankrupt. You should therefore only deal with the trustee (as in (i) above) in the same way that you would do so in relation to unsettled tax affairs.

Post-bankruptcy affairs

The trustee in bankruptcy does not deal with the bankrupt’s affairs post-bankruptcy. This means that you may not disclose information about this period to the trustee without the bankrupt’s consent.

However, if the trustee contacts HMRC about a matter that was part of the bankruptcy then you should correspond with the trustee in order to resolve it. You would not need to obtain the consent of the bankrupt first. This is because the trustee will continue to deal with the pre-bankruptcy affairs until he or she has repaid as much of the debt as the bankrupt’s assets allow, which can be long after discharge. HMRC would therefore continue to deal with the trustee about those historic affairs until the tax position was settled between it and the trustee. See also IDG40660.

If the matter has arisen after the bankrupt has been discharged, and he or she is once again allowed to deal with his or her financial affairs going forward, then you should correspond with the bankrupt in the same way that you correspond with an ordinary customer about their tax affairs.

Repayments of tax and NICs

In England, Wales and Northern Ireland any repayments of tax paid for a period before the date of bankruptcy will generally be paid to the trustee in bankruptcy.

You should contact the trustee in bankruptcy before making any repayments of tax arising for the period after the date of bankruptcy. Although repayments can be paid directly to the bankrupt the trustee may have first call on any funds that arise in the period after bankruptcy.

In Scotland, the issue of tax repayment in bankruptcy cases is more difficult and you should seek further advice from insolvency specialists in Scotland.