| It is a general rule that any tax that is owed by | | | | any income received from the start of the tax |
| you up to and including the tax year in which you | | | | year following the year in which bankruptcy |
| are bankrupt will be claimed by the tax authorities | | | | occurs. |
| from the Trustee or Official Receiver as a | | | | Electronic notification of the bankruptcy order |
| dividend. This means that in the year you are | | | | takes immediate effect which enables the local |
| made bankrupt any tax that you pay will be | | | | tax office dealing with the bankrupt taxpayer's |
| collected by the OR and distributed by him. | | | | affairs to identify where appropriate cases where |
| So if you are employed and paying tax under Pay | | | | the nil tax (NT) code will be applied. |
| As You Earn (PAYE), you should ask your tax | | | | The monies refunded to you an dleft in your pay |
| office to put you onto a 'Nil' tax code immediately | | | | packet as a result of the change to the NT |
| after the bankruptcy order. The effect of this will | | | | code are a direct consequence of the making of |
| be that you will be paid your wages with tax | | | | the bankruptcy order and should therefore be |
| included within the pay. If for any reason this | | | | available for the benefit of the bankruptcy estate. |
| does not happen, and some tax is deducted after | | | | This is not yours to spend. You must make this |
| bankruptcy, this should be refunded to you by | | | | available to the OR. The surplus income that you |
| the Revenue. However, if you move to a | | | | have can be included by the OR in an Income |
| different employer, this rule ceases to apply and | | | | Payments Agreement. So in effect, you will not |
| tax should be deducted on an 'emergency' basis. | | | | pay any tax to HMRC but instead the amount |
| The NT code is applied to all income earned by | | | | that you would have paid in tax you will pay to |
| the bankrupt after the bankruptcy order date, | | | | the OR for the remainder of the tax year as an |
| either until such time as there is a change in the | | | | IPA. |
| bankrupt's source of income, or the tax year in | | | | In all cases, the OR should ensure that the |
| which bankruptcy occurs comes to an end, | | | | bankrupt and his/her family are left with sufficient |
| whichever event is the earliest. This means the | | | | funds for their reasonable domestic needs even |
| bankrupt does not pay any tax on his/her income | | | | after the nil tax coding. In some circumstances it |
| whilst the NT code is in force and is thus in | | | | may not be appropriate to require the bankrupt |
| receipt of additional income to that received prior | | | | to consent to an IPA to collect the additional |
| to the application of the NT coding. | | | | income resulting from the NT coding, if the |
| If you are self-employed, your duty to pay tax | | | | bankrupt can demonstrate that this would cause |
| directly to the Revenue will no longer apply to the | | | | him/her to experience financial hardship. |
| tax year of bankruptcy or any previous year. | | | | When an IPA based upon nil tax has been agreed |
| You start paying tax directly from the following | | | | and the bankrupt has signed the Tax and National |
| tax year. | | | | Insurance Disclosure Authority (form TNIDIS) this |
| One exception to the last rule affects | | | | can be forwarded to the local tax office with |
| self-employed workers in the construction | | | | form IRNTC to request that HMRC forward |
| industry, who have tax taken off their earnings at | | | | notice of the NT coding to the official receiver's |
| a flat rate of 18%. This deduction continues after | | | | agents to enable them to commence collection of |
| bankruptcy, and the amounts that are deducted | | | | the NT IPA. |
| between your bankruptcy order and the following | | | | If it takes time to implement the NT code and |
| 5 April are paid by the Revenue to your Trustee. | | | | the bankrupt will then receive the overpayment |
| If the bankrupt changes income source/employer | | | | of tax as a refund at the end of the tax year. |
| during the course of the tax year in which he/she | | | | HMRC have confirmed that the application of the |
| is made bankrupt (which could include becoming | | | | NT code to a bankrupt's income will not have any |
| self – employed having previously been PAYE | | | | impact on a bankrupt's claim for working tax |
| employed), HMRC deems this to be a change in | | | | credits |
| source of income, and a new tax code will be | | | | If you have any issues whatever regarding your |
| issued. The bankrupt will be required to pay tax | | | | tax coding or you think you may go bankrupt and |
| on his/her earnings from the date of the change. | | | | want to know more please contact me. |
| The bankrupt also becomes liable for tax again on | | | | |