Insolvency and VAT Notice 700/56: What it means for businesses and practitioners

When a VAT-registered business becomes insolvent, special rules apply to how VAT is accounted for and who should be contacted. This explainer outlines the key facts, who is affected, and practical next steps, with plain-language explanations of terms often used in HMRC guidance.

What the guidance covers

The VAT Notice 700/56 tells insolvency practitioners and others how to handle VAT when a business is insolvent. It covers who to contact, how to account for output VAT and input VAT during insolvency, and where to find official processes. The page has been updated over time to link to the Insolvency Practitioner’s Handbook for certain sections, and some sections have been replaced or removed. If you are an insolvency practitioner or a VAT-registered business entering insolvency, you should follow the current links in the notice to the relevant detailed sections.

Key facts you should know

1) VAT registration status remains important during insolvency. 2) Insolvency practitioners may need to coordinate with HMRC on how VAT is accounted for as assets, liabilities, or claims. 3) The guidance directs practitioners to the Insolvency Practitioner’s Handbook for specific sections that have been updated or moved. 4) Updates to the notice occur over time, so rely on the latest linked sections on GOV.UK for current rules.

Who is affected

This guidance primarily affects VAT-registered businesses that become insolvent and the insolvency practitioners appointed to manage those businesses. HMRC staff who handle VAT matters in insolvency cases may also rely on the notice for procedural steps. If you are dealing with an insolvent VAT-registered company, you may need to act through an insolvency practitioner and consult the linked sections in the Insolvency Practitioner’s Handbook for precise rules.

Practical next steps

For business owners or insolvency practitioners:

• Check the latest version of VAT Notice 700/56 on GOV.UK and follow the links to the Insolvency Practitioner’s Handbook for sections updated or moved.
• Contact HMRC’s VAT team with questions about how to account for VAT during the insolvency process.
• Document all VAT-related transactions and claims as part of the insolvency process, and ensure any VAT refunds or payments are handled according to the current guidance.
• Note that section updates and removals may mean you should consult the linked sections rather than older copies of the notice.

Limits and questions

The notice directs readers to the Insolvency Practitioner’s Handbook for specifics in some areas, and some sections were removed or replaced. If you need clarification on a particular rule, check the latest linked official guidance or seek professional advice. The information here reflects the guidance as available but should be verified against the current GOV.UK pages and its linked materials.

Information and responsibility notice: This article is general information based on the cited material available when published. It is not legal, tax, immigration, medical, financial, banking, or investment advice; it does not create a professional-client relationship; and it is not a guarantee of outcome, availability, accuracy, or eligibility. Rules, schedules, prices, and third-party information can change. Confirm material decisions with the relevant authority and an appropriately qualified adviser before acting.