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HMRC's Covid-19 response in insolvency situations

09 April 2020
Tax | DWF
HMRC has confirmed its approach to insolvency during the coronavirus pandemic.

In addition to a number of other tax measures announced to support businesses, such as deferral of VAT payments and a Time to Pay helpline (see our summary here), HMRC has confirmed its approach to insolvency during the coronavirus pandemic.

What has HMRC said to insolvency practitioners supervising Individual Voluntary Arrangements (IVA) and Company Voluntary Arrangements (CVA)?

HMRC is expecting insolvency practitioners to exercise all available discretion, and confirmed that HMRC will support a three month break from contributions (from 1 April to 1 July 2020) where businesses are suffering as a result of Covid-19. Specifically, HMRC has said:

  • "Where the terms of an arrangement allow the supervisor discretion, we would expect that discretion to be exercised to its maximum, with reference to creditors only if essential.
  • HMRC will support a minimum three month break from contributions from customers impacted by coronavirus.
  • There is no need to contact HMRC to request this deferment. On conclusion of the initial three months deferment, depending on the coronavirus situation, further guidance will be issued. If necessary, further discretion could be applied without reverting to creditors."

HMRC will not treat any deferment as a breach of any terms of the arrangement requiring payment of VAT as it becomes due, but notes that there may be cases where serious non-payment of VAT pre-dates the current situation. HMRC has indicated that where this is the case, it will be in contact with insolvency supervisors, though there may be delays in receiving communication, as HMRC's resource is directed elsewhere.

Will HMRC begin enforcement action?

HMRC has confirmed that it has paused the majority of enforcement action for now. This means that HMRC will not petition for bankruptcy and winding up orders unless HMRC deem it to be essential, such as in cases of fraud or criminal activity.

Will HMRC be accepting new insolvency proposals?

HMRC has said it will continue to deal with new CVAs, administrations, IVAs and trust deed proposals to allow those businesses who need financial support, to get access to the appropriate insolvency regime.

As referred to above, where an insolvency supervisor or trustee representing a business considers that clients are unable to maintain their IVA or CVA trust deed payments, HMRC will support a variation to allow a three month break from contributions. If after 1 July 2020, the business is still struggling to meet commitments, the current advice is to contact the contact Enforcement and Insolvency Service helpline discuss a time to pay arrangement depending on the circumstances. It is likely that further guidance will be issued over the coming months.

HMRC has also confirmed that face to face insolvency visits to customers have been suspended during this period. 

Next steps

If you would like to discuss these or other insolvency or tax measures in more detail, please contact our specialist teams: 

Further Reading