HMRC ceasing to provide tax clearance in Members’ Voluntary Liquidation cases

IPA Insolvency Practitioner newsletter, December 2023

On 6th December, HMRC issued an insolvency guidance paper confirming that tax clearance in Members’ Voluntary Liquidation (MVL) cases would no longer be provided with immediate effect. A copy of the guidance paper can be found here.

As clearance will no longer be provided by HMRC, the due diligence process prior to agreeing to act as Liquidator in a potential MVL case needs to include checks and confirmation from the directors, accountants and book-keepers on the submission of returns to HMRC to confirm that all returns have been lodged and that there are no known compliance checks ongoing by HMRC. IPs may consider that copies of the last submitted returns and payments made to HMRC may be needed to provide some evidence of the position.

Members may also consider that issuing a Notice of Intended Dividend to HMRC to obtain any claim in the estate may assist with finalising the position of any tax liabilities in the MVL.

It may also be prudent to review any indemnities that the IP may be looking to ask directors or shareholders to sign to ensure that these provide the proper cover and ability to request repayment of funds etc. Solicitor advice on the indemnity that you are looking to provide may be useful to confirm that the indemnity continues to hold the ability to reclaim or claim funds.

The guidance is also clear that the cessation of clearance includes all requests already received by HMRC and where a response has not been made. If you have MVL cases where the estate remains open purely due to waiting for tax clearance, the guidance confirms that this will not be issued. IPs should therefore review their portfolio of current MVL cases, and any that are only awaiting clearance should be subject to a review and consideration to taking appropriate steps to finalising and closing relevant cases.