Bankrupt Client

T.C.

I have a client, who is still trading, but was declared bankrupt earlier in the tax year. Does anyone know if there are any special rules when I complete his tax return?

Poodle

Hi TC

My experience with this is that the OR will have already advised HMR&C for you and dont expect to get any help from HMR&C on this.

However, I would still make a note in one of the white boxes.

Additionally, your client must pay you up front as they are not allowed to incurr any credit.

If they are CIS and they normally get a refund then do not rely on this for your fee as this will probably not be repaid to you or your client it may well be sent directly to the OR instead, with any repayment showing as being 'credited out' of your clients account on you agent page.

T.C.

Thanks, very helpful!

JodieR

The way it works is that the tax due on the year in which the bankruptcy's made gets included in the bankruptcy and doesn't have to be paid (as poodle points out, if it's a refund situation then the refund shouldn't be issued). Your client may continue to receive statements from HMRC showing tax due, but these are just for information and shouldn't be paid.
From the start of the new tax year HMRC should issue your client with a new UTR and future tax returns will be submitted under that UTR.
So, if your client went bankrupt in July 2009 then the 2009/10 tax return will filed under the original UTR and the tax due/to be refunded will be included in the bankruptcy, and from 2010/11 they're use the new UTR and pay tax as normal.

Jodie

T.C.

Just to update you on this one. The online service on HMRC is now showing "official receiver" instead of my client's name. So I can now submit his return without worrying about whether I should do anything else - that is if he provides me with his accounts of course!