tax return in bankruptcy

Flyright

But if you continue in the same trade (i.e the day after the bankruptcy order you trade the same way as the day before) you should treat everything post-bankruptcy as a new business but HMRC will not apply a new reference number until the next tax return. As you pay no tax in the tax year of your bankruptcy HMRC will will require a return for all traders because the post-bankruptcy tax due until the end of the tax year will be claimed in the bankruptcy, effectively the same as an NT code for people who are employed. If you continue in the same trade, HMRC do not see it as a change of source so will not give a new reference the day after the bankruptcy.

debtinfo

Flyright wrote: »

But if you continue in the same trade (i.e the day after the bankruptcy order you trade the same way as the day before) you should treat everything post-bankruptcy as a new business but HMRC will not apply a new reference number until the next tax return. As you pay no tax in the tax year of your bankruptcy HMRC will will require a return for all traders because the post-bankruptcy tax due until the end of the tax year will be claimed in the bankruptcy, effectively the same as an NT code for people who are employed. If you continue in the same trade, HMRC do not see it as a change of source so will not give a new reference the day after the bankruptcy.

It is a change of source as legally your business comes to an end on the day of the bankruptcy order, a totally new business starts the next day and so the tax generated whilst operating the new business does not fall into the bankruptcy, you do not get a nill tax code and the OR does not collect any tax from you during the bankruptcy as they would for a PAYE person, instead they allow you an allowance to save for your tax during the bankruptcy which should be payable to HMRC at the end of the tax year

Flyright

I don't think that's right, this is a quote from HMRC's website about the way tax is treated in the tax year of bankruptcy if a person continues to trade:

In years subsequent to that in which the bankruptcy order was made, a bankrupt is liable in the ordinary way in respect of any income or gains.
Liability for the year of bankruptcy on a trade source existing at the date of the bankruptcy order will form the bankruptcy debt for that year, whether that trade

• Ceases at the date of the bankruptcy order

Or

• Continues beyond that date but ceases before the following 5 April

Or

• Continues beyond the following 5 April

debtinfo

Yes but the point is that if you start trading again that is classed as a new trade source

Flyright

But HMRC will still expect one tax return for that tax year, covering both 'old' and 'new' businesses where the same trade continues. I hope people aren't getting confused by this too much!

pauleenbruce

i am totally bamboozeled by everything that has been said here mind you it dont take much, thank you all for your input. So do i just phone hmrc and tell them that i have not traded since march but have been employed continuesly since then and so payed tax via paye but bankrupt since august. thanks again for all the help i have had and continue to have on this forum dont know what i would do without it.

debtinfo

pauleenbruce wrote: »

i am totally bamboozeled by everything that has been said here mind you it dont take much, thank you all for your input. So do i just phone hmrc and tell them that i have not traded since march but have been employed continuesly since then and so payed tax via paye but bankrupt since august. thanks again for all the help i have had and continue to have on this forum dont know what i would do without it.

Yes thats correct

BaldEagle

Flyright wrote: »

But HMRC will still expect one tax return for that tax year, covering both 'old' and 'new' businesses where the same trade continues. I hope people aren't getting confused by this too much!

Sorry to drag up an old thread but is this definitely correct? Have had conflicting information from the HMRC website and when I phoned them a while back.

FYI, was declared BR in March but continued trading.

debtinfo

No you would treat them as two separate businesses

BaldEagle

That's why I dragged up the old thread because that's kind of what I was told. You submit a tax return from 6 April XX to date of BR and then another from BR+1 to 5 April. HMRC have told me both which is why I'm confused...