VDIM9040 | Circumstances affecting default interest: Informal insolvency

This guidance deals with interest matters in respect of prescribed accounting periods starting on or before 31 December 2022. Interest matters with effect from 01 January 2023 are dealt with under Finance Act 2009.

Please see Compliance Handbook page CH140000 onwards to find the new interest rules guidance.

A taxpayer in informal insolvency (computer codes 5 and 7 on the insolvency suite) attracts default interest in the pre and post insolvency periods. Separate assessments should be raised for both the pre and post relevant periods.

In some cases setting the insolvency indicator may override the automatic two year time limit for interest; if this happens then manual correction using the VAT663 procedure, see VDIM6000, will be appropriate.