Circumstances affecting default interest: Informal insolvency
A taxpayer in informal insolvency (computer codes 5 and 7 on the insolvency suite) attracts default interest in the pre and post insolvency periods. Separate assessments should be raised for both the pre and post relevant periods.
You should refer to the Insolvency Manual for full details of insolvency processing and its effect on officer’s assessments, interest, penalties and surcharge.
In some cases setting the insolvency indicator may override the automatic two year time limit for interest; if this happens then manual correction using the VAT663 procedure, see VDIM6000, will be appropriate.