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HMRC internal manual

Securities Guidance

The security: using security: using a performance bond: insolvent businesses

If there is a debt on file at the date of insolvency check it with the National Insolvency Unit before calling in the bond.

Where the person becomes formally insolvent you may call upon the financial institution to pay the VAT debt up to the full extent of the bond. This is not a preference payment (s127 Insolvency Act 1986) as the financial institution has legally agreed to cover security required under the terms of the bond. It is for the financial institution to subsequently seek to recover the money paid to HMRC in part of the financial institution’s own insolvency claim.