Distribution costs

May 2010

Part 1 Distribution costs

36A.7 Time and rate charging mechanism for distributions

The financial regime introduced from 1 April 2004 provides that the official receiver may charge time and rate, (see paragraph 36A.4), for the activity of distributing funds to creditors [note 1]. VAT is chargeable on this fee. Previously the official receiver charged a distribution fee but this was revoked by the Insolvency Proceedings (Fees) Order 2004 (as amended) (FO2004) for all cases, including those where the insolvency order was made before 1 April 2004.


36A.8 Distributions where release applied for

Distributions in those cases where release can be applied for are now being carried out by the National Dividends Unit (NDU) which is in the process of taking over this role from the Regional Trustee and Liquidator Units (RTLUs).  For further information concerning the transfer protocol to the NDU see paragraph 36A.11. Currently interim dividends are still dealt with by the RTLUs.


36A.9 Standardisation of distribution costs

Actual time spent on dealing with distributions is not to be used. Instead, to achieve standardisation of costs associated with distributions, a charge should be made based on the tables provided at Annex C, except in exceptional circumstances.  These tables avoid the need to complete a time recording sheet detailing time spent on distributions in each case, by providing guidance using the hourly rates as recorded in the legislation[note 2] and the anticipated time that will be spent in making a distribution, depending on the number of creditors.

Where there are more than 50 creditors, the official receiver, in practice now the NDU, should charge the highest cost as per the tables at Annex C.


36A.10 Calculating creditor numbers where set-off applied

(Amended February 2011)

When banks or similar organisations have submitted a proof of debt combining several debts such as credit card, loan, overdraft etc, or where set-off has been applied, the balance of the debt as per the submitted proof should be counted as a separate creditor in respect of each account for calculating the number of creditors on a case when charging a time and rate fee.


36A.11 Transfer of cases to the National Dividends Unit (NDU)

The NDU is a national unit which opened on 1 October 2008  to deal with the majority of dividend work for all official receiver’s offices.  It is based in the offices of the official receiver at Croydon. The NDU will accept cases from official receivers’ offices that have a credit balance on the estate account and on which a dividend can be declared and paid.  Further information on the protocol for transferring credit balance cases to the NDU,  and dividend probability calculators for both London and provincial cases, can be found on the intranet at: http://intranet/CAD/NDU/Credit%20balance%20trans.htm. This protocol only applies to those cases where release can be applied for. 


36A.12  Level of time and rate fee to be charged according to IRegs 1994

The IRegs 1994 provide for a distinction between the official receiver of the London insolvency district and the official receiver of any other insolvency district for the purposes of charging the time and rate fee.  The London insolvency district is defined by section 374 of the IA86. With regard to cases administered by the NDU,  it will be the (original) last official receiver for the case who will remain as the official receiver in charge, so if the underlying case is based in the High Court in London then the London rates will apply, but in every other case, the non-London rates will apply.


36A.13 Distribution activity

(Amended February 2011)

The time and rate fee for distribution activity [note 1] should be charged at the point at which the dividend payment is requested from EAS through ISCIS and should be applied to the total number of creditors to be paid out. The fee includes the distribution of funds to both preferential and non-preferential creditors and returns of capital to contributories. It does not include payment of expenses such as the return of the petition deposit or the payment of the petitioning creditor's costs (for which there is no charge). There is a standard block of activity which is performed in relation to all preferential payments or dividends, regardless of the number of creditors, which includes:

  • issuing a notice of intended dividend 
  • preparing the advertisement although this is not mandatory where only a preferential distribution is being paid 
  • ensuring that the deposit has been posted to the account, any Indivisible Balances and/or Reserved Funds have been transferred back to the estate and all fees and disbursements have been charged correctly on the ISCIS Financials ledger (‘Funds’ tab)
  • making a distribution calculation using the Dividend Probability Calculators which establishes if there are sufficient funds to make a distribution. 
  • consider transferring the case to the National Dividends Unit where the criteria for transfer are met.

See also paragraph 36A.21 for information on the advertisement required depending on the date the petition was presented.


36A.14 Recording on ISCIS the commencement date of distribution activity

There is currently no area to record this on ISCIS.


36A.15 Recording on ISCIS the date when distribution activity ceases

There is currently no area to record this on ISCIS.


36A.16 Time and rate fees charged to be input on ISCIS Financials

(Amended February 2011)

The time and rate fees will need to be input on ISCIS Financials. They should be charged at the point at which the dividend payment is requested from EAS through ISCIS and should be applied to the total number of creditors to be paid out. VAT is charged on this fee. Where applicable, staff in the NDU  arrange for the entries to made on the ISCIS Financials estate ledger.   


36A.17 Cost of advertising dividends

Advertisements for dividends (as they relate to distributions) are not covered by the administration fee and therefore need to be charged to the estate. This will also include advertisements of returns of capital to contributories in liquidations.  Following the changes to the IR86 regarding gazetting and other advertising of insolvency matters,  which came into force on 6 April 2009, the decision as to whether a public advertisement of intended first dividend payment is required will depend on whether the petition was presented before, on or after 6 April 2009.  See Part 2 of this chapter, paragraph 36A.21 for further information as to the action required, depending on the date the petition was presented.  Where a public notice or advertisement of a dividend payment is required, this is now dealt with by Tribal, the agent acting on behalf of The Service. See Chapter 5 paragraphs 5.17 and 5.18 for further information on placing advertisements using Tribal.

All cases where release can be applied for and where there is a credit balance on the estate and a dividend can be declared and paid, can be transferred to the NDU, whose responsibility it will be to make the dividend payment. When the NDU receives charge details for distribution advertisements, after approving the advertisement for payment, the details will be forwarded to EAS to enable them to arrange for payment from the estate.


36A.18 No distribution fees in cases administered under a previous insolvency regime

Where the official receiver is dealing with historic cases that are administered under a previous insolvency regime (such as the Companies Act 1985 or the Bankruptcy Act 1914) the official receiver must be aware that, should assets come to light in such cases requiring realisation (e.g. unpaid royalties), no fees can be charged in connection with action taken to recover or distribute the asset, following the revocation of the Bankruptcy Fees Order 1984, the Companies (Department of Trade and Industry) Fees Order 1985 and the Insolvency Fees Order 1986 (FO1986) [note 3]. In the case of the FO1986, there were saved fees (the Secretary of State fees) which continued to be applicable to cases that were commenced under the IA86 after 29 December 1986 but in respect of which, a winding-up order or bankruptcy order was made before 1 April 2004 (described as the “old cases”). All fees relating to “old cases” were abolished on 1 April 2007 following the implementation of the Insolvency Proceedings (Fees) (Amendment) Order 2007. Regulations 33 and 36 of the IRegs94, dealing with the time and rate fee, continue to apply with reference to calculating the official receiver's remuneration in dealing with assets subject to a fixed or floating charge,  where both the winding-up order and the realisation and distribution (if any) preceded 1 April 2004. See also paragraph 36A.81 in Part 5 of this chapter, for further information on the regulations governing the charging of the official receiver’s remuneration.


[Back to Introduction] [On to Part 2 Distribution procedure]