Insolvency firms hit out at VAT-refund plan

Insolvency practitioners are joining the throngs of professionals angrily protesting against the three-year limit on claims for VAT-refunds about to be brought in by retrospective legislation.

David Mond, insolvency practitioner with Hodgson’s in Manchester and chairman of the Society of Practitioners Smaller Pratcice Issues Commitee, said: ‘I think it is monstrously unfair. Retrospective legislation in this area is wrong. It would hurt creditors and severely reduce dividends.’

The problem for insolvency practitioners arises because Customs & Excise recommends that insolvent companies surrender their VAT registration as soon as possible. But insolvency practitioners continue to pay out input tax on expenses during their appointment, and traditionally wait until their work is finished before claiming the VAT repayment, often after three years.

Mond said: ‘Insolvency practitioners have tended to push the claim to the sidelines. Now they could have to review their internal processes to get these claims in quicker. This could produce more work, but at a possible cost to creditors.’

The Society of Practitioners of Insolvency has received numerous complaints from its members about the three-year limit.

A spokesman said that the SPI was considering the full implications and would enter the consultation process.

There are three main options for the insolvency profession: to campaign for a lengthening of the time limit; ask for an exemption from the three-year limit; or delay deregistering insolvent companies for VAT.