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HMRC internal manual

PAYE Manual

Coding: coding: general principles: bankruptcy

If an employee or occupational pensioner becomes bankrupt you must be careful to follow the special rules that apply in these cases.

Full details of the rules covering bankruptcy can be found in the Insolvency (INS) Manual.

Interim orders or voluntary arrangements do not affect PAYE deductions unless the code includes an underpayment which is included within a voluntary arrangement. In these cases follow the guidance within action guide tax40028 otherwise leave the coding unchanged.

General rules

The following rules apply to all cases

  • When you write or speak to the employer / pension provider never refer to the employee / pensioner as bankrupt
  • In Contact History add an historical note to the record using these words

      Or in Scotland
  • Set the No Repayment indicator in the Maintain Individual area for non Self Assessment cases. For Self Assessment cases set the No Repayment signal on the SA system (this signal will flow through to the PAYE Service in these cases)

Coding action

When an employee or occupational pensioner becomes bankrupt the coding action you need to take will be different if Scottish rules of law apply.

The Action Guides relating to Bankruptcy have been replaced by action guide 1 to 19 which are available on the PT Operations Guidance Gateway, see Bankruptcy action guides.