June 2004
36.155 Insolvency Services Account
Except where the liquidator or trustee is exercising his power to carry on the business of the company or bankrupt and the Secretary of State has authorised operation of a local bank account, the liquidator of a company wound-up by the court or trustee in bankruptcy shall pay all money received by him in the course of carrying out his functions as such without any deduction into the Insolvency Services Account kept by the Secretary of State at the Bank of England. The Insolvency Service operates a single realisations account for all official receivers offices. Monies to be banked by the official receiver e.g. cash recovered on inspection, should be paid into a local bank account and which will forward the deposit to the Central Realisations Account. The official receiver must send a copy of any general receipt issued in respect of cash taken and banked locally to OR Banking and must also provide OR Banking with details of the paying in slip reference. All other monies are sent to OR Banking Section for banking. There will be a transfer of cleared funds to the Insolvency Services Account on a daily basis. Cheques are not cleared through the system until 5 working days after payment in. Payment will therefore be made to the Insolvency Services Account on the fifth day after payment.
Notes: [Insolvency Regulations 1994, Regulation 5(1), 20(1) S403] [Insolvency Regulations 1994, Regulation 21(1)]
36.156 Local bank account
If the official receiver as liquidator or trustee intends to exercise his power to carry on the business of the company or bankrupt, he may apply to the Secretary of State (Technical Section) for authorisation to open a local bank account and the Secretary of State may authorise him to make his payments into and out of a specified bank, subject to a limit, instead of the Insolvency Services Account . Authorisation will only be given where Technical Section acting on behalf of the Secretary of State is satisfied that an administrative advantage will be derived from having such an account. The liquidator or trustee shall pay without deduction any surplus over any limit imposed by the Secretary of State into the Insolvency Services Account. The official receiver should exercise extreme care to ensure that only money belonging to the estate is paid into the Insolvency Services Account. Third party monies should not be paid in but held in a separate account.
Notes: [Insolvency Regulations 1994, Regulation 6 and 21]
36.157 Investments in Government Stocks (Gilts)
Where the official receiver is liquidator or trustee he may choose to invest in Government Stocks (Gilts). Automatic interest will be paid on any funds remaining following such an investment. There is no minimum sum which can be invested in Government Stocks. The official receiver cannot purchase the Stock direct but must make a written request for the purchase to IP Banking.
The purchase cost is recorded against the estate and the funds marked as committed. The official receiver must ensure that sufficient funds remain in the estate account to cover anticipated fees and expenses during the life of the Stock to avoid early encashment, which could lead to potential losses. There are some thirty different Stocks available for purchase at any one time, all with different redemption dates. However, redemption can be on any date during the span of years. The choice of date rests solely with HM Government. Because of the number of different Stocks available it is suggested that the official receiver contact IP Banking for further details before considering this type of investment..
Once a request to purchase Government Stock has been actioned, IP Banking will advise the official receiver of the nominal value and purchase cost of the Stock. Since 1 April 2004 there has been a fixed fee of £50 for the purchase of Stock which should be charged to the estate (fee INV1).
If the case is subsequently handed over to an insolvency practitioner, the official receiver should provide him with full details of Stock currently held and inform Cashiers/Treasury at IP Banking that the case has been transferred.
At any time after 1 April 2004, whenever there are monies standing to the credit of the company or to the credit of the estate of the bankrupt in the Insolvency Services Account, the company or bankruptcy estate shall be entitled to interest on those monies at the rate of 4.25% gross per annum. From the 1 August 2004 this rate was increased to 4.75% gross per annum. The Secretary of State may by notice published in the London Gazette, vary the rate of interest. Interest rate details appear in the IP Banking area of the Insolvency Service website. On LOLA the interest and relevant tax are automatically applied and no action is required by the official receiver.
Notes: [S406,Insolvency Regulations 1994,Regulation 9 and 23A (as amended by the amendment regulations 2004)] [Fee INV1]
36.158 Taxation
When closing the case the official receiver should ensure that all Stock has been redeemed or sold prior to closure and that the tax has been assessed and paid where necessary. Stock purchased on behalf of the estate attracts interest which is paid to the estate without deduction of tax. The official receiver when acting as liquidator or trustee should submit returns to the Inland Revenue each year showing the company's or bankrupt's estate income or other gains and arrange for the post winding-up order or bankruptcy order tax to be paid as an expense of the estate.
36.159
When the investment matures, the gain is calculated as the maturity value less the original cost of purchase together with the appropriate investment fee.
Notes:[Fees Order 2004, Fee INV1]
36.160 Payment of interest
At any time after 1 April 2004 whenever there are monies standing to the credit of the company or the estate of the bankrupt in the Insolvency Services Account the company or bankruptcy estate shall be entitled to interest on those monies at the rate of 4.75% per annum. The Secretary of State may by notice published in the London Gazette vary the rate of interest and such variation shall have effect from the day after the date of publication of the notice in the London Gazette. Interest shall cease to accrue when the liquidator or trustee gives written notice to the Secretary of State that in his/her opinion it is expedient or necessary in order to facilitate the conclusion of the winding up/bankruptcy that the interest should cease to accrue. Interest shall start to accrue again where the liquidator or trustee gives a further notice in writing to the Secretary of State requesting that interest should start to accrue again. Where the official receiver is liquidator or trustee, LOLA automatically calculates and posts the interest twice a year. Every 6 months LOLA will produce a report centrally detailing the total amount of interest and tax paid. The tax element is remitted to the Inland Revenue directly by transfer of funds from the Insolvency Services Account.
Where the case is being handed over to an insolvency practitioner liquidator, the official receiver should ensure that any interest earned is credited up to date and any necessary fees charged as at the time of the hand over. However, the hand over should not be delayed by the calculation. Upon receipt by IP Banking of the transfer to the insolvency practitioner, any balance will be placed on an interest bearing account.
Notes: [Amendment Regulations 2004, 9(6), 23A]
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