Monthly Law Update | Social Housing July 2018 Introduction  Supply chain  This update shows the main legislative and case law  developments and statutory guidance issued in  connection with the Social Housing sector from the  last month (June 2018) together with links to the  relevant sources where you can obtain further  information.  If you have any concerns about any of the  developments outlined in this update, or if you require  any advice on the effect of the developments or on  how to respond appropriately, please contact: 

Aston Villa face a winding up petition issued by HMRC for unpaid tax. If you’re a business owner the one thing you don’t want to receive is a winding up petition because as soon as your bank finds out about the petition the company bank account will usually be frozen.

This means that even if you have money to pay the petition debt you might not be able to get access to it leaving you in grave danger of going into compulsory liquidation.

HM Revenue & Customs (“HMRC”) has issued a consultation entitled “Tax Abuse and Insolvency: A Discussion Document” on how it proposes to confront those who misuse insolvency law as a means of avoiding or evading their tax liabilities.

Briefings

A recent ruling by the English High Court in BILTA v RBS1, concerning EU Emissions Allowances (“EUAs” or “carbon-credits”) trading has re-opened the debate on when materials forming part of an internal investigation can benefit from litigation privilege. The decision further undermines the restrictive approach taken by Andrews J in SFO v ENRC2 when applying the “sole or dominant purpose test” to dual-purpose communications.

Background – Emissions Trading Fraud

The Facts

PV Solar Solutions Ltd (the "Company") supplied and installed solar panels. When the government reduced preferential tariffs, the Company's profits were affected and it entered Administration in May 2013. The Company subsequently entered into voluntary Liquidation in November 2014.

Introduction

The recent case ofPlant & Plant (administrators of Relentless Software Ltd) v Vision Games 1 Ltd & Ors1 concerns the attempt of a funder of a video games developer to recover the proceeds of a tax credit payment made by HMRC to the developer, pursuant to the security that had been granted by the developer to the funder.

In assessing whether the funder could recover such sums, the High Court was asked to consider various issues, including:

When creditors are demanding payment and money is tight the easiest thing to do is pay those who are shouting the loudest. Often HMRC debts, including Winding Up Petitions, are ignored in favour of paying suppliers so that a business can keep going. However, ignoring HMRC can lead to unavoidable failure of a company.

The recent case of Farnborough Airport Properties Company and another v HMRC is noteworthy for the light it shines on the dimly lit and often difficult interaction between tax law and insolvency.

The issues

The Insolvency Service has recently published a rather extreme example of a director’s failed attempt to circumvent disqualification[1].

Remuneration schemes involving Employee Benefit Trusts (EBTs) have become more prevalent over the last 20 years, often as a way of seeking to remunerate key employees without making pay as you earn or national insurance contributions. Given the developments highlighted below, insolvency practitioners are advised to investigate such schemes in matters coming across their desks to see whether funds can be clawed back for the benefit of creditors.

HM Revenue and Customs’ opinion on EBT schemes