ICAS call for wider review of the Common Financial Tool

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david-menzies By David Menzies, Director of Practice

18 October 2017

ICAS has called for the Scottish Government to defer a decision on how debtor contributions are calculated in Scottish debt solutions and to carry out an urgent assessment of the policy objective. David Menzies reports on the recommendations made.

Responding to the consultation on the future of the Common Financial Tool issued by the Accountant in Bankruptcy (AiB), ICAS has called for a more considered review of the model by which debtor contributions are assessed in Scottish debt and insolvency solutions.

The Common Financial Statement (CFS) issued by the Money Advice Trust is currently designated as the Common Financial Tool and the standardised method used in a Scottish debt solution to assess a debtor’s income and expenditure and determine the amount a debtor can contribute towards what they owe.

Across the rest of the UK, the Standard Financial Statement (SFS) issued by the Money Advice Service is in the process of being adopted to provide a single format for summarising a debtor’s income and expenditure.

The AiB issued a consultation in September 2017 seeking views on whether the SFS should replace the CFS, and if so, when the change should be made.

ICAS CFT Response

The ICAS response highlights that the Common Financial Tool was introduced to provide consistency in how much a debtor could reasonably afford to contribute towards their debts when in a formal debt solution. Insight obtained following the introduction of the CFS indicates that this consistency has not been achieved and that the evidence and documentation to support the CFS are overly burdensome.

The operation of CFS and SFS is broadly similar and therefore under either method the policy objective of consistency will not be achieved. In addition, the administrative burden on all stakeholders will continue to be felt.

ICAS has therefore called on the Scottish Government to not simply consider whether the method used should be CFS or SFS, but whether an alternative approach should now be considered which would address the issues identified.

ICAS has suggested that a percentage scale applied against income after defined essential expenditure would achieve the objective. Additionally, this would require minimal requirement to maintain assessment against living costs in the future and would substantially reduce costs and funding required to maintain the Common Financial Tool.

Opportunity to address failings

Notwithstanding the general position adopted by ICAS, the consultation response highlights that there are advantages and disadvantages for adopting SFS or retaining CFS. ICAS estimates that, based on AiB statistics, a switch to SFS would result in a 12% increase in expenditure trigger breaches resulting in additional costs in the region of £450,000 per annum based on current insolvency and DAS levels evidencing concluding whether such expenditure was justified or not.

ICAS agree with the consultation document which states that ‘Applied appropriately, either tool should produce the same outcome’. ICAS has concerns about how achievable that is.

ICAS also highlighted that the opportunity should be taken when amending legislation in respect of the Common Financial Tool to address significant failings in the current legislation which have resulted in inappropriate regulation and a lack of control over Scottish debt solutions. The relationship between the providers of SFS/CFS, the AiB, the Scottish Government, insolvency practitioners and their regulatory bodies needs to be set on an appropriate footing to achieve this.

The AiB consultation remains open for responses until 27 October 2017.


  • Consultations and responses
  • Insolvency

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