The below is a quick snapshot of three recent tax-related developments in the insolvency and restructuring sphere.
Farnborough – appointment of a receiver and tax grouping
The below is a quick snapshot of three recent tax-related developments in the insolvency and restructuring sphere.
Farnborough – appointment of a receiver and tax grouping
This summer has seen several pension issues making the news. They show how essential it is for employers and trustees to keep abreast of how developments impact on their arrangements.
Jay Doraisamy looks at five areas which have made the headlines this summer:
In the English High Court case of Revenue and Customs Commissioners v Football League Ltd (Football Association Premier League Ltd intervening) [2012] EWHC 1372 (Ch); [2012] WLR (D) 163, HM Revenue and Customs (HMRC) brought a general challenge to the "football creditors rule".
The First-tier Tribunal has issued its decision in the case ofM Gilbert (t/a United Foods) v HMRC, one of the first cases concerning a claim for entrepreneurs' relief to reach the First-tier Tribunal. The Tribunal was asked to decide whether a taxpayer had disposed of part of his business or, as HMRC argued, simply sold some of the assets used to carry on the business.
Company Insolvencies
One of the criticisms that is often made of the UK’s complex insolvency legislation is that it is too easy for the directors of a company to put it into liquidation or administration, ‘dump’ the company’s debts and then effectively start the same business again under the guise of a new company. Such phoenixism has often been of concern to HMRC both in the civil and criminal fields and prosecutions have been made against directors who have undertaken such activities on a repeated basis.
Personal Liability Notices (‘PLNs’)
HMRC is leading an increasingly tough stance against owners of businesses that have failed to pay their taxes before going bankrupt, says City law firm Wedlake Bell.
Figures from the Insolvency Service reveal that in the last year Bankruptcy Restriction Orders (or equivalent undertakings) were obtained against 443 bankrupts because of neglect of their business - a majority of which were alleged to have consistently failed to pay taxes to HMRC. This was an increase of 21% on last year and concern actions taken against sole traders and partnerships (Year ending March 31).
Guidance published by HMRC in its Corporate Finance Manual has recently been updated to reflect a change in practice regarding the corporation tax treatment of debt for equity swaps.
Debt for equity swaps are commonly used in corporate restructuring, particularly when a company is in financial difficulty. They may also be encountered in the termination of joint venture arrangements where, prior to the sale of shares in the joint venture company by one co-venturer to the other, the parties wish to convert any loans made to the company into shares.
S271 Insolvency Act 1986 provides that a bankruptcy petition may be dismissed if the court is satisfied that a debtor can pay his debt, or has made an offer to secure or compound the debt, the acceptance of which offer would lead to the petition being dismissed and that the offer has been unreasonably refused. But what is a reasonable refusal?