Pre-insolvency VAT debt

Insolvent persons can receive repayment of certain VAT credits even if there is also a pre-insolvency VAT debt due to HMRC. This is achieved by excluding certain pre‐insolvency VAT debts from set-off under VATA 1994, s. 81 against VAT credits arising during insolvency (s. 81(4A)–(4D)), as substituted by FA 1995, s. 27(2) in relation to amounts becoming due from HMRC after 30 April 1995). This exclusion helps traders trade out of insolvency.

Example: Pre and post-insolvency debts

A winding-up order was made against Fierce Ltd on 1 September last year. The company had not previously been:

1in administration;

2in administrative receivership;

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