The effects of death, insolvency and incapacity on registration: insolvency and bankruptcy of partnerships
Under the Partnership Act 1890, section 33(1), if one of the partners becomes bankrupt, the partnership is automatically dissolved (unless the partnership agreement provides that the partnership should continue in existence after such an event).
However, if one partner in a partnership of three or more partners goes bankrupt, you should allow the partnership to continue to account for VAT using its existing registration number (in accordance with the VAT Act 1994, section 45(1)).
If the partnership is registered in the names of the partners, you may have to amend the name to take account of the removal of the bankrupt partner. If, on the other hand, it is registered in the name of the firm, no changes to the registration details will need to be made. However, in both cases you will need to ensure that any amendments to the VAT 2 are made to keep it up to date.
If, after the bankrupt partner has left the partnership, there is only one remaining partner, you should consider the case in accordance with VATREG43150.
You will need to deal with the bankrupt partner in accordance with guidance and instructions on insolvency and bankruptcy.