Members will be aware that as a result of Regulation 9 of the VAT Regulations, which treats an insolvency practitioner (IP) as the taxable person only for the duration of their office, HMRC has been unable to make repayments of VAT once an IP has vacated office. HMRC are aware that this can sometimes cause practical problems for IPs who are unable to delay the vacation of office pending receipt of an expected  VAT refund, for example in an Administration which automatically comes to an end (unless extended) after a period of 12 months, or where, pre 6 April 2017, a final meeting had been convened in a liquidation or bankruptcy.

In order to facilitate the IP vacating office HMRC has agreed that an office holder can assign the VAT refund to a third party prior to vacating office. R3 and HMRC have agreed the form of wording to be used, with an accompanying notice. The Notice of Assignment should be submitted in duplicate, one copy to be endorsed by HMRC to confirm receipt and then returned to the assignee. Only one copy of the actual Deed should be submitted. This Deed can be used for repayment claims made on either a VAT 426 or a VAT return.

Members are advised that such an assignment should not be used routinely when closing an insolvency case and only where considered absolutely necessary. Care should therefore be taken to ensure that final VAT returns continue to be submitted in good time to HMRC. There will however be occasions where, due to circumstances outside of the office holder’s control, the VAT refund is not received prior to closure of a case. In these exceptional circumstances  the assignment may be completed and submitted to HMRC, prior to the office holder vacating office.

Office holders are advised that HMC would only honour an assignment if there are no other post-appointment debts owed by the company to HMRC. Office holders should therefore ensure that all post-appointment VAT and other taxes have been declared and paid to HMRC before entering into such an assignment. If there are outstanding liabilities any repayment claim would be set off against such liabilities under the provisions of Section 130 of the Finance Act 2008.