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HMRC has in the past allowed insolvency practitioners to cancel the VAT registration of the business they have been appointed over at an early stage and account for VAT on any subsequent supplies using form VAT 833 Statement of Value Added Tax on goods sold in satisfaction of a debt.

As part of a review of this process, HMRC has received legal confirmation that a deregistered business can no longer issue a valid VAT invoice. This could result in VAT registered buyers of assets from insolvent businesses being denied claims for input tax on the purchase of the assets in question.

Consequently, HMRC can no longer allow such 'early' deregistration of insolvent businesses.

Even though trading may have ceased, VAT legislation requires a business to register and remain registered for VAT if that business is making taxable supplies above the VAT registration threshold. 'Taxable supplies' in that context would include asset realisations by an insolvency practitioner.

Consequently, HMRC will now keep insolvent VAT registrations open until all trading has ceased and all assets are realised (though an insolvent business can still apply to deregister on the grounds that it is continuing to trade below the VAT registration threshold).

Insolvency practitioners are required to render VAT returns and appropriate payment, if any, for each VAT period until the registration ceases.

See HMRC link.

If you wish to discuss this issue please contact Frances Coulson ( or Graham McPhie (

This is intended for general information only and should not be considered as giving advice in relation to any individual case nor be taken as applying to any particular case. No liability is accepted for any such use of the information contained in this e-alert. Should you wish to instruct us on any detailed matter, please contact Frances Coulson or Graham McPhie.


Standout firm known for its personal insolvency work for clients including private companies, individuals and governmental institutions. Frequently acts for insolvency practitioners, assisting with the realisation of assets, both in the UK and abroad.

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