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Insolvency technical update – August 2021

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david-menzies By David Menzies, Director of Practice

2 September 2021

Insolvency technical update – your round-up of recent developments in insolvency

SIP 3.1 consultation

The Joint Insolvency Committee (JIC) is consulting on changes to Statement of Insolvency Practice 3.1 - Individual Voluntary Arrangements.

JIC undertook a consultation, issued in May 2020, which included revisions to SIP 3.1. At that time the revisions had been identified as being relevant changes as part of a review of SIP 3.2 on Company Voluntary Arrangements. No detailed review of SIP 3.1 was carried out at that time. This consultation builds on the work carried out in 2020 and the draft revised SIP 3.1 now being consulted on follows a detailed review of SIP 3.1.

The consultation closes on 5 November 2021.

Changes to SIP 16 and SIP 13 for Northern Ireland

The Administration (Restrictions on Disposal etc. to Connected Persons) Regulations (Northern Ireland) 2021, which came into effect on 25 June 2021, impose additional obligations on connected person purchasers in administrations.

These legislative changes mean that it has been necessary to make changes to two Statements of Insolvency Practice (SIPs) to align the content of the standards with the law now in effect in Northern Ireland. The updated SIPs are:

  • SIP 16 – pre-packaged sales in administrations
  • SIP 13 - disposal of assets to connected parties in an insolvency process

No changes have been made to the SIPs other than those required by the changes in the law.

Coronavirus (Extension and Expiry) (Scotland) Act 2021 (“the 2021 Act”)

The 2021 Act received Royal Assent on 4 August 2021. It amends the expiry date of certain provisions of the Coronavirus (Scotland) Act 2020 and Coronavirus (No.2) (Scotland) Act 2020 (“the Scottish acts”).

The changes to the law introduced by part 1 of the Scottish acts were due to expire on 30 September 2021. The 2021 Act extends part 1 of each of the Scottish acts until 31 March 2022 and also allows for secondary legislation to be introduced and approved by parliament to allow further extensions up to 30 September 2022.

However, the prohibition against benefitting from more than one moratorium on diligence in any 12-month period is not extended. Additionally, the period of notice required to evict a tenant holding a commercial lease reverts back to 14 days from 14 weeks for a monetary breach (non-payment of rent) as of 30 September 2021.

The extension does however apply to other temporary bankruptcy-related measures, such as:

  • The increase of the minimum debt level for creditor petitions to £10,000.
  • The extension of the length of the moratorium against diligence from 6 weeks to a period of 6 months.
  • The ability to allow meetings of creditors to take place using electronic means.

COVID recovery consultation

The Scottish Government has launched a consultation seeking views on legislative reform to support Scotland’s recovery from the COVID pandemic.

The consultation includes several topics of relevance for those involved in personal debt, insolvency and restructuring, including the permanency of the temporary COVID measures recently extended by the 2021 Act.

Consultation responses are invited by 9 November 2021.

HMRC Insolvency Guidance – update on service levels

HMRC has provided an update on the continuing delays to some of its services which are affecting IPs.

Insolvency (VAT Notice 700/56) – funded pension schemes

Insolvency (VAT Notice 700/56) has been updated to include a new section for funded pension schemes.

Dear IP

Dear IP 134 has been issued by the Insolvency Service. The edition features HMRC guidance on the interaction between insolvency and steps it is taking in relation to disguised remuneration and the loan charge plus details of the extension of, and updates to, the IVA Protocol COVID-19 Guidance.

Dear IP 135 has been issued by the Insolvency Service. The edition features articles in relation to claims management companies – regulated activities, COMI, Part A1 moratorium monitor appointments and reporting misconduct in relation to Bounce Bank Loans.

AiB Dear Trustee

The AiB has issued a ‘Dear Trustee’ letter which gives notice of its intention to introduce the requirement for all trustees’ proposals, in relation to property and debtor discharge recommendations, to be created and submitted electronically through the BASYS case management system.

This requirement will come into effect on 1 November 2021.

Bounce Back Loans: FAQs for the Insolvency Profession

An FAQ for the insolvency profession has been compiled by R3, in conjunction with UK Finance, British Business Bank and the Insolvency Service, on the interaction between Bounce Back Loans and insolvency situations.

Following a discussion on the FAQ between R3, ICAEW, IPA and ICAS, in particular the answer given by the contributors to Q.10, a joint meeting is being sought with the Insolvency Service to pursue a more balanced position on the safeguarding of funds prior to insolvency.

Individual Voluntary Arrangement (IVA) protocol guidance

The COVID-19: Individual Voluntary Arrangement (IVA) protocol guidance was reviewed and republished on 30 July 2021. The IVA Standing Committee has agreed that the revised guidance will now be extended until 31 December 2021.

Legal update

George Amil and M V Overwaele against George Lafferty: A reclaiming motion by the defenders in a case where decree for default was granted in their absence at a peremptory hearing in relation to a conveyance of property that the trustee alleges was designed to frustrate him, as trustee, and creditors from possessing and selling the subjects.

Claims Advisory Group Limited v The Commissioners for HM Revenue and Customs [2021] UKUT 0199 (TCC): The Upper Tribunal has upheld an earlier decision by the First Tier Tribunal that a company engaged in recovering personal protection insurance (PPI) is not acting as an insurance agent nor performing services related to insurance transactions. The services provided by the company are therefore not exempt from VAT. IPs should consider whether any PPI claims companies engaged have failed to charged VAT on their services.


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