On 11 October 2016, the High Court10 held that statutory interest payable on an insolvency (under rule 2.88(7) IR 1986) is not “yearly interest” for UK tax purposes. Such statutory interest is therefore not subject to UK withholding tax (20%).
The facts of the case are somewhat unusual in that there was a substantial surplus in the administration and the statutory interest was estimated at £5bn. However the decision is a welcome clarification of the position. It also confirms HMRC’s previous guidance on the taxation of statutory interest (subsequently withdrawn).
On 29 November 2016, the First-tier Tribunal9 held that the issue of growth shares to certain key employees had inadvertently caused an existing class of ordinary shares to carry a preferential right to assets on a winding up. The effect of this was that both prior ordinary share issues, and future share issues, failed to meet the requirement of the Enterprise Investment Scheme (EIS) rules.
The Claim
Arjo Wiggins Appleton Limited (“AWA Limited”) was a wholly owned subsidiary of Sequana SA (the “Defendant”). BAT Industries Plc (“BAT Plc”), through a series of corporate acquisitions, became liable to pay for part of an environmental clean-up operation in the USA. AWA Limited was also liable to indemnify BAT Plc for part of that liability.
In December 2008, AWA Limited’s directors signed a solvency statement confirming that, in the opinion of the directors;
In Lehman Brothers International (Europe) (in Administration) v Exxonmobil Financial Services BV(1) the High Court considered a range of issues arising from the application of the close-out provisions of the standard-form Global Master Repurchase Agreement (GMRA) 2000.
The Insolvency (England and Wales) Rules 2016 (the “2016 Rules”) were published on 18 October 2016 and laid before Parliament on 25 October 2016. The 2016 Rules are due to come into force with effect from 6 April 2017. The 2016 Rules are the product of an extensive programme of consultation with a range of parties, including the insolvency profession, creditor representatives, insolvency regulators and public bodies. The aim was to streamline the process and reduce regulation with the ultimate goal of increasing returns to creditors.
In Lomas and others v HMRC [2016] EWHC 2492 (Ch), the High Court has confirmed that statutory interest payable on insolvency is not 'yearly interest' for UK tax purposes. The administrators therefore had no obligation to account for income tax on the interest payments made. The Court was also critical of HMRC's contradictory guidance on this issue.
Background
The Court of Appeal has resolved previously conflicting case law to confirm that a bankrupt cannot be obliged to crystallise his pension benefits in order to produce income to pay off creditors.
The Claim
In an earlier Judgment the Court at first instance ruled that Countrywide Surveyors Limited (the “Defendant”) was liable in deceit to Mortgage Express (the “Claimant”), in relation to 39 loans, further to property valuations produced by the Defendant.