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HMRC internal manual

VAT Default Interest Manual

Circumstances affecting default interest: Insolvency

Before assessments are made or error notifications processed for insolvent taxpayers, Debt Management and Banking Insolvency, (This content has been withheld because of exemptions in the Freedom of Information Act 2000) should be contacted for further advice, particularly if the assessment or disclosure spans the insolvency date. Initial guidance is contained in the VAEC manual.

Periods before the date of insolvency (pre relevant periods)

Interest may be charged for any liable tax in pre relevant periods. If the insolvency indicator is already set assessments containing a pre relevant period cannot be processed and so interest needs to be calculated manually.

Periods after the date of insolvency (post relevant periods)

Interest is not charged for under declarations in post relevant periods. For these periods the interest inhibit must be set on any under declared lines of the assessment.

Interest already charged on previous assessments

If a D1972 report is received listing an assessment which has since been affected by setting the insolvency indicator, the taxpayer’s folder should be checked (including any amendments) to find out if interest was charged. If it was charged for any period which now falls after the date of insolvency, DMB insolvency should be consulted before any further action is taken. This also applies to any misdeclaration penalty charged, see VCP10700. Also refer to guidance VAEC1000 VAT Assessment & Error Correction.