8. Crown departments
Crown departments
This section contains content published after 1 January 2020. Articles published before this date can be found on the National Archives here
HMRC is currently receiving bulk payments in Individual Voluntary Arrangement (IVA) cases where dividends for multiple cases are paid in one lump sum and lists, including a breakdown of the payments, are sent by e-mail.
From 1 February 2021, HMRC will no longer accept bulk payments.
Please now make changes to the way you pay dividends in IVAs as follows:
- Each payment should be paid individually using HMRC’s case reference number. If you do not have a reference number, please contact HMRC and they will provide it.
- Dividends due to HMRC should be retained and paid as one single payment – at the same time as the supervisor issues the notice and final report under Rule 8.31.
- Where the total dividend to HMRC at the end of an IVA is less than £10.00, HMRC do not expect this payment to be paid. This increases the administering costs.
- If you haven’t received a provisional claim for IVAs approved before 1 January 2018, please do not contact HMRC for reference numbers or claim requests.
Trust deeds
All dividend payments should be paid into the correct bank account using the case references detailed below. Please note that dividend payments should not be paid into regular tax accounts. Using an incorrect account number and sort code will delay identifying and closing cases.
From 1 February 2021, HMRC will no longer accept bulk payments. Please make separate individual payments for each case quoting the reference number included on the claim.
What you need to do
Payments relating to a claim should be made through BACS/CHAPS using the following details:
Sort code: 20-20-48
Account number: 30944793
Account Name: HMRC NIC Receipts
EIS reference number: The EIS reference number will be quoted on all new HMRC claims and letters and will be used as a reference for the lifetime of the claim. Payments cannot be accepted without an EIS reference.
Payment reference number
The unique case payment reference number can be found on HMRC’s claim. You’ll need to use this 13-character payment reference when you pay. This is the customer’s 10-digit unique case reference number followed by a three-letter suffix to show the type of insolvency the dividend refers to. The following table details the dividend types and their unique three-digit suffixes.
| Dividend Type | Suffix |
|---|---|
| Individual Voluntary Arrangement | IVA |
| Sequestrations | SEQ |
| Trust Deeds | TRD |
| Irish Bankruptcy | IBY |
| Members Voluntary Liquidations | MVL |
| Company Liquidation Cases | LIQ |
| Individual Bankruptcy or Partnerships | BKY |
| Company Voluntary Arrangement | CVA |
| Partnership Voluntary Arrangement | PVA |
| Administration | ADM |
| Petition Costs | PET |
Note: HMRC’s unique case reference numbers start with 623 or 075 or 880 followed by 7 digits.
Example 1:
Reference number from the claim: 623/1234567
Dividend type: Individual Voluntary Arrangement
Payment reference: 6231234567IVA (13 characters)
Example 2:
Reference number from the claim: 075/7654321/XXX
Dividend type: Members Voluntary Liquidation
Payment reference: 0757654321MVL (13 characters)
Example 3:
Reference number from the claim: 880/1357911/XXX 26 VA
Dividend type: Administration
Payment reference: 8801357911ADM (13 characters)
Contact HMRC if you are unsure of the reference format or its claim does not have a reference number. Please always pay using electronic banking. This helps HMRC provide the best possible service. HMRC can no longer process cheques, so if you send them to HMRC, they will have to return them to you.
If you have any questions about this, please contact [email protected]
There may be times when you need to record tax and national insurance due on a preferential dividend paid to the former employees of an insolvent entity. For example:
-
holiday pay.
-
arrears of pay arising before the date of insolvency.
Please help HMRC ensure these payments are allocated correctly by setting up a new PAYE scheme:
-
contact HMRC to set up the scheme only when you are ready to make the payments.
-
once the employments cease, please ensure HMRC receives a final Full Payment Submission (FPS) with a cessation date. This will prevent any reminder or late penalty notices being issued, should the scheme remain inactive.
How to I set up a PAYE scheme?
Contact HMRC’s Employer Helpline on 0300 2003200
Tell the advisor you need to set up an EPA scheme – they will ask you for the following information:
-
the name and national insurance number (NINO) of directors, if available.
-
your phone number and email details.
-
address of your registered office.
-
any other correspondence addressed HMRC may need to note for you.
-
date of the first pay day.
The advisor will then ask some more questions and tell you what you will receive and when.
Making additional payments
If you need to make additional payments after the final FPS has been submitted, please contact HMRC’s Employer Helpline who can arrange for the scheme to be restarted.
This can only be done:
-
in the same tax year as the date of cessation, or
-
in the next tax year after the date of cessation.
HMRC’s previous article, in April 2020, has caused some of you a little confusion and although payments have gone to the right place, this update is being issued to provide clarification. Please accept HMRC’s apologies for any confusion caused.
Payment reference number
The unique case reference number can be found on HMRC’s claims. You’ll need to use this 13-character payment reference when you pay. This is the customer’s 10-digit unique case reference number, followed by a three-letter suffix to show the type of insolvency the dividend refers to. The following table details the dividend types and their unique three-letter suffixes:
| Dividend type | Suffix |
|---|---|
| Individual Voluntary Arrangement | IVA |
| Sequestrations | SEQ |
| Trust Deeds | TRD |
| Irish Bankruptcy | IBY |
| Members Voluntary Liquidations | MVL |
| Company Liquidation Cases | LIQ |
| Individual Bankruptcy or Partnerships | BKY |
| Company Voluntary Arrangement | CVA |
| Partnership Voluntary Arrangement | PVA |
| Administration | ADM |
Note: HMRC unique case reference numbers start with 623 or 075 or 880 followed by seven digits.
Example 1:
Reference number from claim: 623/1234567
Dividend type: Individual Voluntary Arrangement
Payment reference: 6231234567IVA (13 characters)
Example 2:
Reference number from claim: 075/7654321/XXX
Dividend type: Members Voluntary Liquidation
Payment reference: 0757654321MVL (13 characters)
Example 3:
Reference number from claim: 880/1357911/XXX 26 VA
Dividend type: Administration
Payment reference: 8801357911ADM (13 characters)
Please contact HMRC if you are unsure how to use the reference format, or the claim doesn’t have a reference number.
As part of HMRC’s work to reduce the administrative burden on insolvency practitioners, it is improving its process for when Companies House notify HMRC about an insolvent liquidation.
After receiving a notification of liquidation, HMRC will update its system to make these records inactive. This will stop initial and annual notices to file (CT603) being issued, so you won’t have to respond to those communications.
HMRC will write and tell you that it has made the company’s Corporation Tax record is inactive and provide you with the company’s Unique Tax Reference (UTR).
If, during the period of liquidation, there has been no activity giving rise to a charge under Corporation Tax, you will no longer have to submit nil Company Tax returns or liquidator reports. This will remain the case for the period of liquidation and. Under normal circumstances, there will be no requirement to contact HMRC for tax clearance relating to Corporation Tax prior to closing the liquidation.
HMRC will only contact you if it requires a Company Tax return or any additional information.
In insolvent liquidations, you will need to be satisfied you have all outstanding tax matters closed before you move to have the company struck off.
The process for administrations and solvent liquidations remains unchanged.
What happens next?
Over the coming weeks, the new letters stating the company’s Corporation Tax record is inactive and providing the company’s Unique Tax Reference (UTR) will start being delivered.
Once delivered, if insolvency practitioners experience any issues in the initial few months please raise them with R3 or your authorising body, who will contact HMRC to take forward.
Questions & answers
Q. Does HMRC’s new way of working only apply to notifications after the new process is implemented?
A. The new process will only apply to new insolvency cases. For current insolvency cases the insolvency practitioner can inform HMRC that no future returns will be expected, then it won’t normally issue an Annual Notice to File (CT603).
Q. What is the process for CT603s when there’s no liability for Corporation Tax?
A. Where there is no liability for Corporation Tax, the insolvency practitioner does not need to:
- file a nil Company Tax Return (CT600)
- send a liquidator report to HMRC’s CT Services.
To reduce the administrative burden, we would expect insolvency practitioners to file a CT600 only when there is something to declare or in response to
Q. Where there is a Corporation Tax liability, how will accounting periods work?
A. These will continue to be based on the current accounting period rules normally applied to Corporation Tax.
Q. If a Corporation Tax liability exists in one period but not in others, does the insolvency practitioner have to submit further Corporation Tax returns because one has been submitted for the first year? Or are insolvency practitioners expected to file a CT600 for earlier accounting periods only when a Corporation Tax liability arises in a later period?
A. The insolvency practitioner should submit the return of the period where the charge is raised. There is no requirement to complete further returns unless there are additional charges or a CT603 has been issued.
Q. What will happen when there are ‘local arrangements’ in place across firms where there is de minimis liability for Corporation Tax indicating no return is required, or payment made?
A. HMRC does not operate ‘local arrangements’ and returns are required in all cases where a liability exists.
Q. Which address will HMRC write to when confirming with insolvency practitioners that the Corporation Tax records are dormant?
A. HMRC will write to the liquidator’s address (as per details registered at Companies House) once records are updated with the insolvency details. This letter will include the Unique Tax Reference (UTR).
Q. If income is received post liquidation and a tax liability arises, when should a return be made?
Example
In a company voluntary liquidation (CVL) if the company goes into voluntary liquidation on 1st January 2021 - is due to file tax returns to 31 December each year and income is received in March 2022.
Would insolvency practitioners be expected to submit a tax return for the year ending 31st December 2022? Or is there scope to shorten the period/file one tax return, at the end of the CVL to deal with all income at once?
A. This new process does not change established practices. The insolvency practitioner should follow the guidance https://www.gov.uk/change-your-companys-year-end to shorten the final period.
Q. As tax is payable before a CT600 is due, how does HMRC propose insolvency practitioners obtain the tax payment reference normally stated on the CT603? Can they be obtained over the phone/web chat while the company is marked as dormant or will insolvency practitioners have to write in to request it?
A. Insolvency practitioners can contact HMRC Corporation Tax: general enquiries - GOV.UK via phone or webchat with their proposed accounting period dates and advisors will give them a tax payment reference number.
Q. If a tax return is filed, is the company automatically marked dormant again or does the insolvency practitioner have to contact HMRC to request this?
Example - If a return is filed for the year end 31 December 2022, would a CT603 be issued for the year end 31 December 2023 or would the return be treated as a one-off and not affect the overall dormant status?
A. Insolvency practitioners should submit the return for the period where the charge is raised. There is no requirement to complete future returns unless there are additional charges or a CT603 has been issued.
Q. Insolvency practitioners are asked to satisfy themselves that all outstanding tax matters are closed in insolvent liquidations, before moving to have the company struck off. Does the same apply to compulsory winding up orders?
A. HMRC classify this as an insolvent liquidation.
Disguised remuneration schemes claim to avoid the need to pay Income Tax and National Insurance contributions (NICs). They normally involve a loan or other payment from a third-party which is unlikely to ever be repaid.
The loan charge is a charge to tax that applies to disguised remuneration loans that were outstanding on 5 April 2019.
If an employer has used a disguised remuneration scheme they need to report and pay the loan charge for loans that were:
• made between 9 December 2010 and 5 April 2019 (inclusive), and • still outstanding on 5 April 2019.
There’s more information on gov.uk.
Disguised remuneration settlement opportunity
If an employer has outstanding disguised remuneration liabilities, they can settle them under the 2020 settlement terms. These terms should be used for settlements in relation to all disguised remuneration liabilities. More information is available on gov.uk.
HMRC has not yet sought to prove for the loan charge in corporate insolvency proceedings.
However, HMRC is carrying out compliance checks to find out whether employers reported and paid the right amount of loan charge. Office holders in an insolvency procedure may be contacted as part of these checks. HMRC may also send one or more notices stating its belief that the company, as an employer, must pay more Income Tax and/or NICs relating to remuneration paid to company employees.
Office holders may receive a notice of determination under Regulation 80 of Income Tax (Pay As you Earn) Regulations 2003 (for Income Tax) or a notice of decision under Section 8 of Social Security Contributions (Transfer of Functions, etc.) Act 1999 (for NICs), or both. The notice will explain how to appeal if the office holder disagrees.
Normal insolvency rules apply. So, if an office holder issues a notice of intended dividend, it will be for HMRC to consider whether to prove for the loan charge liabilities, if this has not already been done.
Earlier tax and NICs liabilities
Disguised remuneration schemes can give rise to more than one Income Tax and NICs liability on the same underlying income. For example, a liability could have arisen when a loan was made through a scheme, and again on 5 April 2019 when the loan charge arose on the outstanding loan amount.
HMRC refers to tax liabilities relating to the loans made for tax years before 2018 to 2019 as ‘earlier tax liabilities’.
HMRC may have issued a Regulation 80 determination or Section 8 decision for one or more of the earlier years in which the loans were made.
Both the loan charge and the earlier tax liabilities are due. However, there are ‘double taxation’ rules to make sure that the full amount of Income Tax and NICs is only paid on the underlying income or assets once.
If an office holder pays the tax and NICs liabilities in respect of a company over which they are appointed, HMRC will calculate the full amount due, and give relief under the double taxation rules.
HMRC should include any unpaid earlier tax liabilities on its proof of debt.
Appeals may have already been made against the earlier tax liabilities before the start of the insolvency. If appeals were made, they will still be open unless the insolvency office holder has agreed and finalised the earlier tax liabilities and/or withdrawn the appeals.
Collecting the tax and NICs due from employees
A Regulation 80 determination or Section 8 decision will become final and conclusive if no appeal is received against it, or an appeal is received and either withdrawn or determined by a tribunal or court.
If the employer cannot pay, then 30 days after any Regulation 80 determination has become final and conclusive, HMRC will be able to transfer the obligation to pay from the employer to the employee. It would do this by making a direction under Condition B of Regulation 81 of Income Tax (Pay As you Earn) Regulations 2003.
The employee will have the right to appeal against any Regulation 81 direction. If successful, an appeal may result in the notice being set aside, or the amount being increased/reduced.
If the employee pays the tax due on a Regulation 81 direction relating to the loan charge, then this will reduce any earlier tax liabilities due from the employer. It will reduce those liabilities by an amount equal to the amount the employee pays. This is done under the double taxation rules for the loan charge.
Insolvency considerations
HMRC does not consider loan charge liabilities are an expense of an insolvency. If the employee pays the tax due on a Regulation 81 direction, HMRC may reduce its proof of debt if the earlier tax liability has been previously proved for in the insolvency of an employer.
Enquiries regarding this article may be directed to [email protected]
Disguised remuneration schemes claim to avoid the need to pay Income Tax and National Insurance contributions (NICs). They normally involve a loan or other payment from a third-party which is unlikely to ever be repaid.
The loan charge is a charge to tax that applies to disguised remuneration loans that were outstanding on 5 April 2019.
If an employer has used a disguised remuneration scheme they need to report and pay the loan charge for loans that were:
- made between 9 December 2010 and 5 April 2019 (inclusive), and
- still outstanding on 5 April 2019.
There’s more information on gov.uk.
Disguised remuneration settlement opportunity
If an employer has outstanding disguised remuneration liabilities, they can settle them under the 2020 settlement terms. These terms should be used for settlements in relation to all disguised remuneration liabilities. More information is available on gov.uk.
HMRC has not yet sought to prove for the loan charge in corporate insolvency proceedings.
However, HMRC is carrying out compliance checks to find out whether employers reported and paid the right amount of loan charge. Office holders in an insolvency procedure may be contacted as part of these checks. HMRC may also send one or more notices stating its belief that the company, as an employer, must pay more Income Tax and/or NICs relating to remuneration paid to company employees.
Office holders may receive a notice of determination under Regulation 80 of Income Tax (Pay As you Earn) Regulations 2003 (for Income Tax) or a notice of decision under Section 8 of Social Security Contributions (Transfer of Functions, etc.) Act 1999 (for NICs), or both. The notice will explain how to appeal if the office holder disagrees.
Normal insolvency rules apply. So, if an office holder issues a notice of intended dividend, it will be for HMRC to consider whether to prove for the loan charge liabilities, if this has not already been done.
Earlier tax and NICs liabilities
Disguised remuneration schemes can give rise to more than one Income Tax and NICs liability on the same underlying income. For example, a liability could have arisen when a loan was made through a scheme, and again on 5 April 2019 when the loan charge arose on the outstanding loan amount.
HMRC refers to tax liabilities relating to the loans made for tax years before 2018 to 2019 as ‘earlier tax liabilities’.
HMRC may have issued a Regulation 80 determination or Section 8 decision for one or more of the earlier years in which the loans were made.
Both the loan charge and the earlier tax liabilities are due. However, there are ‘double taxation’ rules to make sure that the full amount of Income Tax and NICs is only paid on the underlying income or assets once.
If an office holder pays the tax and NICs liabilities in respect of a company over which they are appointed, HMRC will calculate the full amount due, and give relief under the double taxation rules.
HMRC should include any unpaid earlier tax liabilities on its proof of debt.
Appeals may have already been made against the earlier tax liabilities before the start of the insolvency. If appeals were made, they will still be open unless the insolvency office holder has agreed and finalised the earlier tax liabilities and/or withdrawn the appeals.
Collecting the tax and NICs due from employees
A Regulation 80 determination or Section 8 decision will become final and conclusive if no appeal is received against it, or an appeal is received and either withdrawn or determined by a tribunal or court.
If the employer cannot pay, then 30 days after any Regulation 80 determination has become final and conclusive, HMRC will be able to transfer the obligation to pay from the employer to the employee. It would do this by making a direction under Condition B of Regulation 81 of Income Tax (Pay As you Earn) Regulations 2003.
The employee will have the right to appeal against any Regulation 81 direction. If successful, an appeal may result in the notice being set aside, or the amount being increased/reduced.
If the employee pays the tax due on a Regulation 81 direction relating to the loan charge, then this will reduce any earlier tax liabilities due from the employer. It will reduce those liabilities by an amount equal to the amount the employee pays. This is done under the double taxation rules for the loan charge.
Insolvency considerations
HMRC does not consider loan charge liabilities are an expense of an insolvency. If the employee pays the tax due on a Regulation 81 direction, HMRC may reduce its proof of debt if the earlier tax liability has been previously proved for in the insolvency of an employer.
Enquiries regarding this article may be directed to [email protected]
You will be aware of continuing delays to some of HMRC’s services, which are affecting Insolvency Practitioners (IPs) who are:
- Notifying insolvencies
- Submitting paper returns
- Requesting repayments
- Waiting for confirmation that matters are concluded.
HMRC apologises for these delays and assure you that it is working hard to bring service levels back to normal.
The delays have happened as a result of issues with a new IT platform and delivering the COVID support schemes.
In recent weeks HMRC has taken steps to improve its processes and increase the number of colleagues supporting insolvency activity, and service levels are improving.
HMRC hopes to be back to the under thirty days level of service you experienced before COVID for:
- Raising of Members Voluntary Liquidations cases during September
- VAT426 claims service by the end of October
As a result of the training and support required for the additional colleagues, you may experience temporary disruption to the availability of phone lines. HMRC will notify you in advance of any temporary service disruption.
In the short-term, HMRC would ask you to continue to only contact Enforcement & Insolvency Services (EIS) for urgent and new cases.
HMRC has seen a significant number of calls asking for progress updates on cases. HMRC fully understands why this is, but the time it spends on progress chasing means it has less time to work through the original requests.
The following EIS phone lines are up-and-running if you or your clients need further support:
- Individual Bankruptcy: 0300 3229242
- CVL/Compulsory Liquidation: 0300 3229241
- Members Voluntary Liquidation: 0300 3227815
- Post Insolvency VAT: 0300 3227018
- VAT426 Team: 0300 3229246
In addition to the activity outlined above, HMRC is also making sure it has enough support for insolvency related workloads going forward as it plans for the ongoing financial impacts of Coronavirus on insolvencies in 2022 and 2023.
Thank you in advance for your continued patience and understanding.
HMRC is occasionally contacted by Insolvency Practitioners (IPs) or their agents seeking appointment in insolvency cases where there are no tax compliance issues or active HMRC investigations. HMRC will only consider requests for nomination in these cases where it can be shown that the appointment of an IP will lead to an increased return to creditors.
Following the introduction of the Insolvency Proceedings (Fees) Order 2016, fees are now charged by the Official Receiver on all cases. Any IP seeking HMRC support for their appointment will need to demonstrate that their appointment will lead to an increased return to HMRC as a creditor after these fees and their own fees and expenses have been considered.
Any requests for nomination as trustee or liquidator in ‘non-compliance’ cases should be sent to [email protected].
You should include the following statutory information:
- Name of company or individual
- Company registration Number (CRN) or any known tax references
- Date of insolvency
- Name and licence number of the IP(s) seeking nomination
- Details of the potential recoveries
- A clear explanation as to the benefit to creditors of the appointment
- A forecast of the anticipated increased return.
This explanation should be case specific, and where possible supported by evidence. In addition, the case should have been discussed with the Official Receiver and their consent to being replaced obtained. Requests for fee approval following any successful appointment will be reviewed on a case by case basis, and support for appointment does not guarantee HMRC approval of fee requests.
HMRC will also continue to review nomination requests where third party evidence or information suggests that a tax or insolvency compliance intervention may be warranted. Such cases should also continue to be sent to [email protected].
However, if a referral relates to suspected fraud or organised criminality then the matter should be referred to HMRC’s fraud investigation specialists at [email protected].
Where debts in an insolvency have arisen through the use of marketed avoidance then referrals should be sent to [email protected].
If you have any questions about the content of this bulletin, please raise them with R3 or your authorising body who will contact HMRC to take forward.
HMRC’s ‘Recording tax and national insurance – preferential dividends’ article (issue 130, chapter 8, article 28) has prompted some further questions. HMRC has therefore updated the guidance and added a question and answer section.
There may be times when you need to record tax and national insurance due on a dividend paid to the former employees of an insolvent entity. For example:
- Holiday pay.
- Arrears of pay arising before the date of insolvency.
- Pay in lieu of notice claims.
- Redundancy pay.
Please help HMRC ensure these payments are allocated correctly by setting up a new PAYE Scheme:
- Contact HMRC to set up the Scheme only when you are ready to make the payments.
- Once the final dividend payment has been made, please ensure HMRC receives a final Full Payment Submission (FPS) with a cessation date for both the former employee(s) of the insolvent entity to whom a dividend payment was made and the EPA scheme. This will prevent any reminder of late penalty notices being issued if the scheme remains active.
How do I set up a PAYE Scheme?
Contact HMRC’s Employer Helpline on 0300 2003200. Tell the advisor you need to set up an EPA Scheme – they will ask you for the following information:
- The name and National Insurance Number (NINO) of directors, if available.
- Your phone number and email details.
- Your registered office address.
- Any other correspondence address HMRC may need to note for you.
- Date of the first pay day.
The advisor will then ask some more questions and tell you what you will receive and when.
Once the EPA Scheme is set up, see PAYE and payroll for employers)[ https://www.gov.uk/paye-for-employers] for guidance on operating PAYE.
Making additional payments
If you need to make additional payments after the Final FPS has been submitted, please contact HMRC’s Employer Helpline who can arrange for the Scheme to be restarted.
This can only be done:
- In the same tax year as the date of cessation or cancellation, or
- the next tax year after the date of cessation or cancellation.
For any other year, a further scheme will need to be set up.
Questions and Answers
Q. If an insolvent entity continues to employ employees after the Insolvency Practitioner’s (IP) appointment and makes payments in respect of any sums owed to employees, which relate to the pre-insolvency period, should an EPA Scheme still be set up for those payments?
A. Yes.
Q. If an insolvent entity continues to employ employees after the IP’s appointment, what scheme should be used when there is tax and National Insurance due on employment income accrued both pre- and post-administration?
Example
A company goes into administration on 15 August, and its employees are paid monthly in arrears on the last calendar day of the month. The company continues to trade, and the administrator decides staff will receive their normal monthly salary payment in full on 31 August. That payment includes:
- Their claim for arrears of pay from 1 to 14 August.
- Post-administration salary from 15 to 31 August.
Other employees may receive holiday pay where entitlement has been accrued both before and after the date of administration.
A. Where there is tax and National Insurance due on employment income earned during both the pre- and post-administration period, these should be reported on an EPA Scheme.
Q. I am concerned that requiring an IP to telephone HMRC’s Employer Helpline could result in excessive wait times or speaking to HMRC staff who aren’t familiar with insolvency. Could contact be made instead via a dedicated email address or phone number?
A. Unfortunately a dedicated email address or phone number is not possible. Internal guidance has been updated to ensure that Employer Helpline advisors have the information they need to deal with requests to set up EPA Schemes.
Q. If the insolvent entity is a sole trader or a partnership, what information do you require instead of the NINO of the directors?
A. NINO of the sole trader or partners.
Q. Where the address of the registered office is asked for, is this the registered office address of the employer if it was a company or the IP’s own firm if he trades through a company?
A. This is the registered office address of the IP.
Q. Where the guidance reads ‘any other correspondence address HMRC may need to note for you’, does that relate to addresses for the IP dealing with the insolvent entity?
A. This would be an alternative address to the registered office. For example, a registered IP may have several office locations and may wish to nominate one as the correspondence address.
Q. Where the date of the first pay day is requested, does this refer to the date the former employee was first paid by the insolvent entity or the date of the first dividend payment?
A. This is the date of the first dividend payment.
Q. Often, there can be a considerable length of time between dividends being paid in an insolvency. If a second or subsequent dividend is declared more than one tax year after the first, what action should the IP take?
A. As referenced in the guidance, a Scheme can be restarted but only:
- In the same year as the date of cessation or cancellation, or
- the next tax year after the date of cessation or cancellation.
For any other year, a new scheme will need to be set up.
Please contact HMRC’s Employer Helpline on 0300 200 3200 to restart or set up a new scheme.
Q. Are you able to provide details of a point of contact at HMRC for IPs who have further queries?
A. If IPs have any further queries about this guidance, they should be directed through R3 or your representative body who will take them forward with HMRC.
Insolvency Practitioners are sending HMRC numerous different versions of the VAT7 postal form and this is causing problems.
Which form to use
The only VAT7 form that should be used (or replicated exactly) is VAT7 v1.3. This form is located on GOV.UK via the Insolvency (VAT Notice 700/56) Public Notice – Cancel your VAT registration.
Using an incorrect version causes many problems. Forms are:
- Being sent to incorrect address.
- Not being received.
- Not recognised by our scanning system and being rejected.
- Not being scanned correctly – the layout of the forms isn’t the same.
- Being captured incorrectly and information is wrong.
- Being rejected.
- Taking longer to reach the relevant HMRC department.
What to do with the form VAT7
The final page of the print and post form states:
What to do now
Print this form – Click the ‘Preview’ button to create a copy to print and post. Please ensure that you check your form carefully before you click ‘Preview’. If you make any changes afterwards, you must click ‘Preview’ again to create a new copy with the changes included.
Send the form to HMRC.
Where to send the form
Please send the completed form to: BT VAT, HM Revenue & Customs BX9 1WR.
VAT7 forms MUST only be sent to this address. A Royal Mail redirection is currently in place for VAT7 forms sent to HMRC’s previous Grimsby address. When the redirection expires all mail sent to this address will be returned to sender.
If you have any questions about this article, please direct them to R3 or your licencing body who will take them forward with HMRC.
HMRC’s bulletin in November regarding the introduction of a dedicated Account Manager for insolvency related Customs queries has prompted further questions, so HMRC has updated this guidance to include some background on Customs, its responsibilities, and a list of the taxes/duties it covers.
Background
Customs works in partnership with UK Border Force and other government agencies to manage customs administration, collecting customs duties, and regulating import and export trade. It also supports traders and promotes export-led growth.
It facilitates trade for compliant customers and goods, while using a range of tools to tackle non-compliance and maximise revenue collection.
The following list gives a flavour of some of Customs’ responsibilities:
- Customs Warehousing
- Simplified Customs Declaration Process
- Duty Deferment Accounts
- Customs Comprehensive Guarantees
- Authorised/End Use
- Inward and outward processing of goods
- Temporary Admissions
- New Community Transit System (NCTS)
- Customs Supervised Exports
- Temporary storage of goods
- Pre-clearance of goods
What taxes/duties does Customs cover?
- Customs duty
- Excise duties
- Anti-Dumping duty
- Countervailing duty
- Corporation Tax, Capital Gains Tax, Inheritance Tax, Insurance Premium Tax, Stamp, Land and Petroleum Revenue Taxes
- Value Added Tax (VAT)
- Environmental taxes
- Climate change and aggregates levy and landfill tax
- National Insurance and Pay as You Earn (PAYE)
- Tax Credits
As part of HMRC’s work to improve the customer journey for Insolvency Practitioners, from 15 November, HMRC has introduced a dedicated Account Manager specifically for insolvency related Customs queries.
The Account Manager will:
- Resolve current issues and manage them through to completion.
- Give customers advice for complex processes and authorisations.
- Provide an escalation route for unexpected issues, through a dedicated mailbox.
- Call Insolvency Practitioners to communicate updates and discuss any issues.
- Escalate issues and work to fill any gaps in guidance.
- Provide advice in advance of any future changes.
- Be the route for escalating Customs related complaints.
- Intervene when Insolvency Practitioners are experiencing difficulties with their normal contact routes into Customs operational teams.
What HMRC needs you to do
Queries should be emailed to Phil Taylor at [email protected]. The email should include INSOLVENCY in the header.
The mailbox launched on Monday 15 November 2021.
If you have any questions, please direct them to R3 or your authorising body who will take them forward with HMRC.
As part of HMRC’s work to improve the customer journey for Insolvency Practitioners, HMRC has introduced a dedicated mailbox for insolvency related cases. Please note this is only to be used when Insolvency Practitioners have been unable to obtain a response when using the normal channels despite repeated attempts.
Escalation route for case queries
Since Q2 of 2020, HMRC has seen a significant increase in case queries concerning VAT returns and tax clearances. We know that some issues have been due to a combination of a failure of IT systems and the redeployment of HMRC colleagues to pandemic support work. The impact on HMRC has been significant.
To help you, HMRC is working to improve communications between HMRC and the profession, whilst also considering internal and external needs. HMRC is improving its processes to ensure reported issues/concerns are dealt with correctly when the usual channels are proving challenging.
One of the steps is to provide a point of contact within the HMRC Customer Services Insolvency team as an escalation route for case queries. This will help HMRC to continue to provide a quality service to Insolvency Practitioners and their colleagues and HMRC kindly asks you to choose one of the options set out below:
What HMRC needs you to do
The mailbox is now live. Any case queries should be emailed to [email protected] following the instructions below and the contact form at the end of this article.
Option 1 – new referrals
- Complete the attached contact form for each individual case.
- Please use the subject heading – ‘Insolvency Case – Name of Insolvency Case’ (e.g. Insolvency Case – Joe Bloggs – IVA).
- Email [email protected] with your completed contact form.
Option 2 – Progress chase
If you have not had a response to your original referral within 15 working days, please:
- Resend the contact form for each individual case.
- Include any further information you may have to date.
- Use the subject heading ‘Insolvency Case – Name of Insolvency Case – Progress Chase’ (e.g. Insolvency Case – Joe Bloggs – IVA – Progress Chase).
- Email [email protected] with your completed contact form.
If you have any questions, please direct them to R3 or your authorising body who will take them forward with HMRC.
HMRC continues to see instances where Insolvency Practitioners incorrectly deny or reduce HMRC’s claim when considering it for voting purposes in a decision procedure, particularly where the insolvent person or others may dispute the amount due to HMRC.
This can result in protracted correspondence between HMRC and the office-holder, additional costs for the insolvency estate and HMRC, and unnecessary delays in administering the insolvency. It has even led to HMRC being forced to report some Insolvency Practitioners to their licencing bodies.
It is well established that it is not open to an Insolvency Practitioner to go behind a debt that has been validly brought into charge using tax legislation, including a tax assessment. The proper mechanism for challenge is the tax tribunals. For example, the decision in D&D Marketing (A Firm) (2002) [2002] EWHC 660; [2003] BPIR 539 established that an amount of tax was deemed to be due notwithstanding a pending appeal.
A similar decision was reached in the more recent case of Re Sharp Business Developments [2015] EWHC 4272 (Ch), where the court again found it was not open to the court or an Insolvency Practitioner to go behind a validly raised HMRC assessment, even if an appeal had already been made but not yet heard, unless the assessment had “been raised in some fraudulent or collusive way or there was some other glaring miscarriage of justice”. The case references other relevant cases such as Lam v Inland Revenue [2005] EWHC 592 (Ch), particularly paragraphs 12 and 13 of Lam.
Where a debt due to HMRC has been established which can be appealed (e.g. through a return having been filed or an assessment being made), the office-holder must accept that debt in full for voting purposes in a decision procedure as it stands. This remains the case even if the office-holder or others consider the amount owed to HMRC to be incorrect. The route to challenge an incorrect HMRC debt is to overturn it through a successful appeal using the tax tribunals, not through rejecting a HMRC proof of debt, or marking it as objected to.
This note is issued by the Head of the Insolvency Profession Team, part of Solicitor’s Office and Legal Services in HMRC. Any questions relating to its content should be addressed to [email protected].
As advised in Dear IP issue 139, HMRC recently launched its new mailbox: [email protected], on 4 November 2021. Since then, HMRC has received a significant number of case queries and it would therefore like to issue a gentle reminder about the criteria when making contact using this mailbox.
HMRC asks that you use this route only when contacts via the normal channels have failed to elicit a response, despite repeated attempts.
To allow HMRC to help you, it asks that in every case, whether that may be Option 1 or 2, the contact form is completed providing full details of your query and this is attached to your email. Without a contact form HMRC will be unable to deal with your query. HMRC does not require any additional attachments. The response time continues to be 15 working days.
HMRC will not respond to emails noted as complaints. HMRC’s published complaints procedure should be followed as usual.
If you have any questions, please direct them to R3 or your authorising body who will take them forward with HMRC.
In April 2017, changes relating to the use of deemed consent procedures were introduced within the Insolvency (England and Wales) Rules 2016 (IR 2016). These amendments altered the way creditors are notified of Creditors’ Voluntary Liquidations (CVL) under Rule 6.1 IR 2016.
Following this change in legislation, HMRC introduced a central mailbox for all Insolvency Practitioners in England and Wales to notify HMRC of a CVL. They were directed to send all notifications to [email protected] from January 2018 onward.
Further potential improvements to the central mailbox have been identified to ensure HMRC can engage with the CVL process as much as possible.
What Insolvency Practitioners should do
From 1 June 2022 if a company or Insolvency Practitioner knows HMRC is already dealing with the company on a compliance matter, please send any initial notification of a CVL directly to the HMRC officer handling that correspondence – not to the central mailbox.
A compliance matter could be an ongoing compliance check or other correspondence regarding determination of the amount of any of the company’s tax liabilities. In all other scenarios involving initial notifications of a CVL, the current mailbox at [email protected] should still be used.
HMRC will continue to evaluate its approach regarding this process but is exploring longer term digital solutions aimed at improving how it engages with the Insolvency Profession.
If you have any questions, please direct them to R3 or your authorising body who will take them forward with HMRC.
Since HMRC’s last communication in January 2022 (Dear IP issue 141), it has seen a significant increase in case queries. HMRC knows that some issues are now resolved, and it is continuing to make progress.
Insolvency Practitioners are reminded to only use the Insolvency Customer Services (InsolCustServices) mailbox when they have been unable to obtain a response despite repeated attempts.
There have been occasions when HMRC colleagues have been working through queries, particularly in MVL cases where there are outstanding returns and the Insolvency Practitioner has requested tax clearance. Prior to contacting InsolCustServices, please ensure any relevant returns have been submitted.
Insolvency Practitioners may not always receive a direct response from InsolCustServices as HMRC escalates cases to the relevant business area. Insolvency Practitioners are more likely to receive a response from them.
HMRC’s team is working hard to ensure responses are provided as soon as possible but, due to the high volume of case enquiries received, there are delays to response times. HMRC is working hard to put this right. Please try to avoid emailing HMRC again unless it is a new query as this may cause further delays.
Until the attached contact form is fully completed, HMRC will be unable to progress your query. To enable HMRC to digitally transfer the information on the form, please avoid handwriting or scanning the form.
HMRC is unable to deal with:
- Complaints – HMRC’s published complaints procedure on Gov.uk must be followed.
- Emails detailing a response to letters received by HMRC – letters must be sent via the normal channels.
- Emails requesting reissuing of letters – e.g. clearance letters.
- Emails copying in multiple additional mailboxes – duplication of work.
- Emails chasing any refunds/repayments – please note, HMRC will process cases it has on hand currently, but from 5 May 2022 it will no longer be able to deal with these.
If you have any questions, please direct them to R3 or your authorising body who will take them forward with HMRC.
As part of HMRC’s work to improve the customer journey for Insolvency Practitioners, it has improved the way it processes VAT returns.
HMRC has introduced a new style VAT100 (2021) and a fully automated process which means when HMRC receives a return it is automatically scanned and captured onto its system.
If your record has been migrated to the new IT system, please ensure you are only using the new versions of the VAT100 that are issued to you. If you need another copy, please contact HMRC, see Insolvency (VAT Notice 700/56).
However, if your record has not been migrated to the new IT system, please continue to use the old versions which have been sent to you. If you are unsure of the status of your record, please contact HMRC, see Insolvency (VAT Notice 700/56).
HMRC has included images of the old and new form to help you identify the differences.
See How to fill in and submit your VAT Return (VAT Notice 700/12) for a list of things to consider when submitting online or paper. Please ensure the boxes are filled in correctly and there are no amendments to the return as they will not be automatically scanned to the system and could cause delays in processing.
The new VAT100 is built to read numerical values only. If you are submitting a nil return of a nil value in any of the 9 boxes, please ensure you use numerical values only 0.00 and do no write ‘nil’ or ‘zero’ for example.
If you have any questions about this article, please contact R3 or your authorising body who will take them forward with HMRC.
HMRC has not always exercised its right as a creditor to vote on some voluntary arrangement proposals. This has sometimes resulted in creditors with lower value involvement influencing the outcome of these proposals. This has led to some proposals being rejected – which results in HMRC not receiving the best return that could be achieved. This has frustrated Insolvency Practitioners who are trying to restructure businesses, sometimes causing businesses to fail when there was an opportunity to rescue them.
In the current financial landscape, where it is beneficial to try and support business restructuring to help them recover from the effects of the past two years, and HMRC’s increased creditor status following the introduction of secondary preference in some taxes, HMRC will be more proactive in the use of its voting rights and will vote on proposals.
This should ensure the best return for HMRC as a creditor – provided the best possible proposal is submitted. It will secure a return for the Exchequer now, and secure future revenue if the proposal is agreed and the business is able to trade out of current difficulties and return to a more stable on-going trading position. This approach also aligns with the BEIS Minister’s commitment to the R3 Chair that HMRC will take a more commercial approach to restructuring proposals.
Please note when HMRC uses its voting rights, it should not be assumed that HMRC will always vote positively. It is important for all parties involved, the business, HMRC and the Insolvency Practitioner, that the best possible proposal is submitted. HMRC often sees ‘exploratory’ proposals rejected, sometimes resulting in improved offers, and on other occasions resulting in the restructuring not being progressed. HMRC will vote against any proposals, as is its right as a creditor, that it considers could or should be better. To avoid delays, additional work and the risk of business failure, please ensure the best offer is proposed at the first approach.
If you have any questions about this article, please contact R3 or your authorising body who will take them forward with HMRC.
HMRC apologises for the loss of some correspondence that was sent to HMRC via Dropbox. The reason for this has been identified as a necessary and important security policy that means whilst Dropbox has considerable storage capacity, data must not be stored in Dropbox. HMRC therefore uses Dropbox only for data transfer with several timing limitations that must therefore be adhered.
This means that Dropbox request links are set automatically to expire after a set time.
Some R3 members have indicated that they tended to build up correspondence items during the day, submitting them to HMRC at the end of each day. These may be the types of items that are being lost due to HMRC’s security requirements.
HMRC would therefore request that Insolvency Practitioners avoid sending correspondence via Dropbox and the close of business each day. Instead, Insolvency Practitioners should hold them overnight and submit them first thing the next day to ensure HMRC teams have the most time during the working day to extract these items before the close of business.
If you have any questions about this article, please contact R3 or your authorising body who will take them forward with HMRC.
HMRC is changing their process for giving Insolvency Practitioners tax clearance in MVL cases. There will no longer be a requirement to post these requests to two separate areas of HMRC.
From 12 September 2022, please email all requests for Corporation Tax (CT), Pay as You Earn (PAYE) and Value Added Tax (VAT) clearance to HMRC’s EIS MVL Team, at: [email protected]
Please make sure you write ‘Clearance - [Name of Insolvency Case]’ in the subject line.
For HMRC to progress your clearance requests quickly, please make sure that: * all returns up to the date of liquidation have been submitted for all tax types, * there is no outstanding debt due up to the date of the liquidation, * statutory interest has been paid (if applicable).
HMRC will check and respond by post, providing one reply covering CT, PAYE, and VAT clearance. Any tax clearance HMRC provides is as at the date of the letter.
HMRC is making these changes so that it is easier for Insolvency Practitioners to obtain all tax clearances in MVL cases together, and to speed up their response.
Please note, you must continue to send all other Corporation tax queries to: HM Revenue and Customs Corporation Tax Services BX9 1AX
Background
HMRC has designed a new voluntary process to allow a more data-driven and targeted approach to the issue of Director’s Loan Accounts (DLAs).
This specifically applies in situations where DLAs are written off as part of a corporate insolvency procedure because the debtor cannot afford to repay the loan to the company. The process is entirely voluntary, and Insolvency Practitioners don’t need to use it if they don’t wish to.
When is a DLA written off?
HMRC repayment guidance is available at CTM61600 and the guidance for writing off a loan is at CTM61655 of HMRC’s Company Taxation Manual.
HMRC’s Customer Strategy & Tax Design (CS&TD) are the product owners for Section 455 CTA 2010 tax and they administer this part of the tax legislation. They have confirmed that there is no prescribed form of words or process for writing off a loan.
The crux of the issue is that the company: * accepts that the loan will not be repaid, and * gives up attempts to collect the debt.
Each case will be judged on its own facts, and the decision as to whether to write a loan off or not is solely a decision for the Insolvency Practitioner to make.
If you are in any doubt about the tax consequences of writing off a loan, then please contact Craig Dickson at [email protected] to discuss the case.
What are the tax consequences of a DLA being written off?
If the company has paid Section 455 tax to HMRC, to claim a repayment of the tax under Section 458 CTA 2010 the loan must be: * released, * repaid, or * written off.
Once one of those events has happened, the company becomes entitled to a repayment of any Section 455 tax that has paid on the loan in question. If only a proportion of the loan has been released, repaid, or written off then the company will only be able to claim for a repayment for that proportion. For example: if 25% of the loan has been released, repaid, or written off then the company can claim for 25% of the Section 455 tax back.
A claim must be made within four years of the end of the financial year in which the repayment, release, or writing off occurs. The repayment is due nine months and one day after the end of the accounting period in which the loan was released, repaid, or written off. In other words, if the loan was written off in accounting period ending 31 December 2021, then repayment would be due on 01 October 2022.
Repayment of S455 tax out of contract settlements
HMRC’s guidance on contract settlements is at EM6000 onwards of the HMRC Enquiry Manual.
Put simply, a customer or customers will pay HMRC a sum of money in return for HMRC not formally issuing assessments for tax and penalties. This sum could be in one lump or over instalments, and a contract can have joint and several liability between different entities. The contract itself is a binding agreement and HMRC’s Debt Management will enforce the payment terms in the same way that they would with any other charge.
Where Section 455 tax has been paid to HMRC as a part of a contract, then the process for providing repayments in line with Section 458 is different.
Payments for contract offers are kept on a separate accounting system (Strategic Accounting Framework Environment or SAFE) – and when a request for repayment under Section 458 is received, HMRC amends the charge on this system. Repayments must be approved by a compliance officer (see EM6415).
If you have a case involving a contract settlement that is proving difficult, then Craig ([email protected]) would be very happy to help as he is the national lead for such cases across Individual and Small Business Compliance (ISBC).
New write off process
Where an Insolvency Practitioner wishes to use the new process, copies of all final reports that contain DLAs should be sent to the new mailbox: [email protected].
Practitioners can contact Craig at the email above prior to the submission if they would like to talk through the details of the case before sending the report to him. Earlier dialogue should mean early handling of any issues or opportunities.
A forwarding rule will be created to ensure that the final reports still get sent on to the mailbox that they get sent to now.
The details of each company will be added to a secure spreadsheet and will be subject to an initial triage to establish any: * tax compliance risks, or * assets that might facilitate recovery.
If there are assets identified that might have been missed, the Insolvency Practitioner will be contacted to discuss potential recovery routes. If there are no assets and if an element of a loan is not going to be fully recovered, then the customer prompt part of the process is enabled.
A ‘nudge’ letter will be sent to each individual customer who has benefited from a loan being written off. This letter will advise them of the need to return the income on their next Self-Assessment tax return per Section 415 Income Tax (Trading and Other Income) Act 2005. (HMRC’s Savings and Investments Manual at SAIM5200 provides more detail).
Customer returns will be monitored to check whether this income has been returned as advised; if it has not then a formal enquiry under Section 9A Taxes Management Act 1970 will be opened.
All information relating to the process will be kept on the secure spreadsheet, which will allow HMRC to: * build up a picture of the volume and quantum of DLAs being written off, and * establish an evidence base on which to develop future compliance work into this customer population.
We also aim to support Insolvency Practitioners in generating better returns for creditors.
Queries
The process is run and maintained by Craig Dickson in ISBC. You can contact Craig with any queries on 03000 592232 or at [email protected].
As you will be aware, HMRC recently made changes to the OTT notification processes designed to increase the productivity, allowing HMRC to turn around your notifications more quickly whilst continuing to meet its legislative and security obligations.
In its recent communications, HMRC advised that it was continuing to review the notification processes with a view to further improvements in the speed it was able to take necessary actions in relation to your submitted notifications of an OTT.
HMRC has outlined below further proposed changes to these processes and would like to consult with you on these.
HMRC would appreciate any feedback you wish to provide in relation to the content, clarity of communication and any relevant comments.
Please send these to [email protected]
by close of business 28 November 2022.
HMRC will consider your feedback before proceeding with and communicating the changes.
Receipt of a Notification of an OTT
HMRC is proposing to cease issuing an Option to Tax Notification Receipt letter. The correct notification of an Option to Tax has been and remains the responsibility of the opter.
Therefore, it is proposed that if the VAT1614A is submitted by any means other than an e-mail you will not receive a response. However, if the VAT1614A is sent via email, an automated email response will still be provided in a format similar to the previous acknowledgements and receipts. The date on the automated response will provide confirmation of the date the option has been notified to HMRC.
Confirming the existence of an Option to Tax
HMRC proposes to cease processing requests to confirm the existence of an Option to Tax on a particular property. It should be remembered that information such as this forms part of the business record and should be kept for 6 years as stated in HMRC’s guidance.
See VAT notice 700/21 (section 2) https://www.gov.uk/guidance/record-keeping-for-vat-notice-70021#record–rules-for-all-vat-registered-businesses and https://www.gov.uk/charge-reclaim-record-vat/keeping-vat-records.
However, if a request is made under one of the following conditions, then HMRC will check to see if it holds a record of the relevant property being opted to tax:
- The effective opted date is likely to be over 6 years ago, or
- If you have been appointed as a Land and Property Act Receiver, or an Insolvency Practitioner to administer the property in question.
Any request to confirm that an Option to Tax is in place on the relevant property must be accompanied by a letter or deed of appointment of your role, otherwise we are unable to assist.
Also please provide the following details:
- The name of the business/person who had opted to tax the property,
- VAT Registration Number (if applicable),
- the full address of the land/property in question, including post code,
- the effective date of the option to tax, if known,
- the date you first charged VAT on the opted land/property,
- the date the property was acquired and/or a loan was taken out by the opter on the relevant property.
Further to HMRC’s bulletin issued on 12 January 2023, HMRC is trialling a dedicated mailbox for Insolvency Practitioners (IPs) to request VAT deregistration confirmation. This is only to be used when IPs have been unable to obtain a response through the normal channels.
The trial started on 9 January 2023 and will run until 9 April 2023.
It is part of HMRC’s work to improve the IP’s customer journey, in line with HMRC’s Charter value of Making Things Easy.
Escalation route for case queries
HMRC has seen a significant increase in VAT deregistration case queries, and it is aware know that some IPs are having difficulty accessing the VAT deregistration telephone lines. Whilst HMRC is working to fix this, it is aware that many of you are frustrated when simply looking for a deregistration date.
To help you, HMRC has set up a direct IP deregistration mailbox to request confirmation of deregistration dates.
Please only use the mailbox:
• When the VAT 7 was submitted more than 40 days ago, • To request a deregistration date. All secondary questions will be unanswered and deleted so that HMRC can prioritise and quickly deal with providing deregistration confirmation.
The HMRC Deregistration Contact form must be fully completed with all information. The form is available in HMRC’s bulletin of 12 January 2023.
Please ensure you use the Deregistration contact form and not the Cust Insol Mailbox contact form for escalations, as they require different details.
The contact form cannot be scanned as the system will not read the data.
In the email subject box write: Insolvency Dereg. Date Request.
What HMRC needs you to do
Contact forms should be e-mailed to [email protected] following the instructions below.
Step 1 – email contact form
• Complete the attached Dereg. contact form for each individual case, • Use the email subject heading: ‘Insolvency Dereg. Date Request’, • Send the email to [email protected] attaching your completed contact form.
Step 2 – if you need to chase progress
If you have not had a response from your original referral within 15 working days, please escalate to [email protected].
The mailbox will be live until 9 April 2023. As this is a trial, we could make further changes.
Further questions
Please contact R3 or your representative group who will contact HMRC.
HMRC would like to thank stakeholders for their time in responding to the recent Option to Tax consultation.
The consultation period ended on 28 November 2022. Since then, HMRC has carefully considered the feedback provided and has decided to implement the proposed changes:
OTT Notification
HMRC will stop issuing Option to Tax Notification Receipt letters from 1 February 2023.
Within a Notification of an Option to Tax, the correct and valid option has been and remains the responsibility of the opter.
When a Notification of Option to Tax is submitted to [email protected], you will receive an automated email response. You should keep this automated response for your records. The date on the automated response will confirm to you the date HMRC has been notified.
A Notification sent by any other means will not receive an acknowledgement of receipt. HMRC will however respond if further information is required.
OTT Charter
HMRC will stop processing requests confirming the existence of an Option to Tax, unless certain circumstances are met, as set out below.
When notifying HMRC of your Option to Tax, it is, and will remain, your responsibility to keep such information as part of your business records. These should be kept for at least 6 years. For more information, please see: • https://www.gov.uk/guidance/record-keeping-for-vat-notice-70021#record–rules-for-all-vat-registered-businesses, and • https://www.gov.uk/charge-reclaim-record-vat/keeping-vat-records.
If a request is made under one of the following conditions, then HMRC will check to see if it holds a record of an Option to Tax for the relevant property: 1. The effective opted date is likely to be over 6 years ago; or 2. If you have been appointed as a Land and Property Act Receiver, or an Insolvency Practitioner to administer the property in question.
If these conditions are met, a request to confirm that an Option to Tax is in place on the relevant property must be accompanied by a letter or deed of appointment of your role, as otherwise HMRC will be unable to assist.
You should also provide the following details:
• Name of the Business/person who had opted to tax the property • A VAT Registration Number (if applicable) • The full address of the land/property in question, including postcode • The effective date of the Option to Tax if known • The date you first charged VAT on the opted land/property • The date the property was acquired and/or a loan was taken out by the opter on the relevant property.
The changes will commence from 1 February 2023.
As part of its work to improve the customer journey for Insolvency Practitioners, HMRC has improved the way VAT returns are processed.
HMRC introduced a new style VAT100 (2021) return and a fully automated process, which means that when a return is received it is automatically scanned and captured onto the system.
If your record has been migrated to the new IT system, please ensure that you are only using the new versions of the VAT100 that are issued to you. If you need another copy, please contact HMRC.
Each VAT100 return has a unique machine-readable barcode which is generated for each specific transaction.
HMRC has noticed an increase in returns being received where the barcode has been altered or deleted, where copies of returns have been used for other cases, and where pre-populated return dates have been manually altered.
If any alterations are made, or returns are made on a form other than the transaction it has been sent for, this can lead to delays in processing as HMRC is unable to use the automated rapid data capture process.
See the guidance at How to fill in and submit your VAT Return (VAT Notice 700/12) for a list of things to consider when submitting online or on paper.
Please ensure that the boxes are filled in correctly and that there are no amendments to the return as they will not be automatically scanned to the system.
If you are submitting a nil return or a nil value in any of the 9 boxes, please ensure you use numerical values only e.g., 0.00 and do not write the words ‘nil’ or ‘zero’. This may cause potential delays in processing as the new VAT100 is built to read numerical values only.
As before, if your record has not been migrated to the new IT system, please continue to use the old versions which have been sent to you. If you are unsure of the status of your record, please contact HMRC.
Below, we have included images of the old and new forms to help you identify the differences.
HMRC knows that you want to get things done as speedily as possible and it wants that too, so to ensure that submissions of all VAT forms are received correctly, please post them directly to the appropriate addresses. See Insolvency (VAT Notice 700/56) for details.
If you have any questions about this Insolvency Bulletin, please direct them to R3 or your representative group who will take them forward with HMRC.
Questions and Answers
Q. Can I send a cheque with a VAT100 (2021) return?
A. Yes, you can send a cheque with the return, but please do not staple the cheque to the return.
Q. I do not have the information needed to complete a pre-insolvency VAT100 (2021) return. What should I do?
A. Please call or write to HMRC using the relevant contact details in Insolvency (VAT Notice 700/56) and their teams will be happy to help you. If writing, please make sure that you have not attached a blank VAT100.
Q. I have not received a response or my repayment, should I send another VAT100?
A. No, please do not send an additional VAT100. HMRC would prefer, if required to chase progress, a letter to be sent to the appropriate address.