HMRC Claims and Proofs of Debt

PART 10

HMRC CORRESPONDENCE, CLAIMS AND PROOFS OF DEBT

September 2012

77.63 Introduction

In April 2012, The Insolvency Service updated the current partnership agreement with HMRC which sets out the legal and policy basis for the exchange of information.  The Partnership Agreement can be found on the ORBS intranet site.  The Insolvency Service liaises regularly with HMRC to discuss operational issues and performance in line with the agreement (see paragraph 77.109).

 

77.64 Information collected by HMRC is confidential

All information collected by HMRC in the course of their functions is confidential [note 1].  This information can only be lawfully disclosed outside the department: 

For the purposes of a function of HMRC;

In pursuance of an order of the court;

With the consent of each person to whom information relates; or

Under another piece of legislation which specifically permits disclosure.

 

77.65 Power to obtain court order for production of information

The official receiver has powers to require the provision of information from HMRC by obtaining a court order [note 2].  HMRC will assist the official receiver’s investigations as far as possible, within the confines of the legislation, without requiring the official receiver to incur the costs and delays of obtaining a court order.  

The official receiver will only request information on cases in which he/she has the legal authority to do so (see paragraph 77.67 for companies and paragraph 77.68 for bankruptcies).

 

77.66 Information released to be relevant and proportionate

HMRC will only disclose information which is relevant and proportionate to the enquiry received. For example, copies of whole inspection reports following a visit to a trader will not normally be sent to the official receiver, but a relevant extract in relation to the enquiry may be sent.

 

77.67 Requesting HMRC information to assist a company investigation

Where HMRC is asked to provide information in relation to a company investigation, information may be disclosed to the official receiver or Company Investigation Team (CIT) with consent from the legal representative of the company.  This will be either the official receiver as office holder, or the insolvency practitioner if one is in office.  CIT must name the insolvency practitioner, and send the signed letter of authority giving the insolvency practitioner’s consent with the initial letter requesting information where an insolvency practitioner is in office (see paragraph 77.81).

Where HMRC holds information about a company’s conduct which might be relevant to the official receiver’s review of the director’s conduct, for example that Crown monies were retained, HMRC will pro-actively provide such information to the official receiver as liquidator as specified in the Partnership Agreement (see paragraph 77.63).

 

77.68 Requesting HMRC information to assist a bankruptcy restriction order

Where HMRC is asked to provide information for the purposes of a bankruptcy restrictions order, only information about the bankrupt’s VAT affairs can be disclosed without the written consent of the bankrupt.  This is because the official receiver as office holder becomes the taxable person of the business formerly carried on by the bankrupt [note 3].  In all other instances, the official receiver will need to get the consent of the bankrupt to make enquiries of HMRC, which will normally be obtained on the form TNIDIS (see paragraph 77.78).

 

77.69 Requesting HMRC information regarding a partnership

Where information is requested regarding a bankrupt who was a member of a partnership, HMRC can only provide information about the bankrupt individual. No information can be provided to the official receiver regarding solvent partners without the written consent of that solvent partner.

 

77.70 Any request to include reference numbers

Any request sent to HMRC for information regarding a company or bankrupt must include the relevant tax reference number, or VAT number where known. See paragraph 78.62 (for VAT enquiries) and paragraph 77.83 (for tax enquiries) where the relevant reference number is not known.

 

77.71 Automatic notification to HMRC of new cases

HMRC receives automatic updates from The Service of all new insolvency orders made.  These updates are generated from data extracted from ISCIS.  As new insolvency order data is sent automatically, the NORD1 form, informing creditors of which office is dealing with a new case, should not be sent to Insolvency Claims Handling Unit (ICHU).  Data is collected from ISCIS and sent under the following headings: 

1) New bankruptcy cases.

2) New company cases.

3) Stay of proceedings of bankruptcy cases.

4) Expired stay of proceedings of bankruptcy cases.

5) Stay of proceedings of company cases.

6) Expired stay of proceedings of company cases.

7) Stay of advertisement of bankruptcy cases.

8) Expired stay of advertisement of bankruptcy cases.

9) Stay of advertisement of company cases.

10) Expired stay of advertisement of company cases.

11) Annulled bankruptcy cases.

12) Rescinded company cases.  

 

77.72 Action required by official receiver 

The data is collected 4 days after it has been input onto ISCIS and is sent automatically to HMRC on Mondays, Tuesdays and Fridays.

The most important information used by ICHU is the case name, company registered office and bankruptcy descriptions.  Official receivers should ensure all information is entered onto ISCIS as quickly and accurately as possible. 

ICHU have advised that if the new order details do not contain the description, it slows down their ability to enter the case onto their system to generate any  claim in the proceedings.  Staff should ensure that the full description is entered onto ISCIS at the same time as the case name and court details to avoid gaps in the data.

 

77.73 Electronic delivery of statutory information to HMRC

Communications about insolvency claims, all statutory notices (apart from the NORD1 which shouldn’t be sent, see paragraph 77.71) and reports relating to insolvencies in which HMRC are listed as a creditor, should be sent by email to carole.nichols@hmrc.gsi.gov.uk.  This information should no longer be sent by post.  See paragraph 77.76 for guidance on sending the information by email.

 

77.74 Information to include in email

The traders tax reference number should be included with all correspondence.  The ICHU’s post team has access to this email account and rules have been set up to automatically file the notices. It is therefore important that the emails are titled with;

1. the ISCIS code for the document, and

2. the case name.

For example: RTC NMN – Bankrupt’s name.

 

77.75 Statutory notices to be sent electronically

(updated October 2013)

The following is a list of the statutory notices which should be sent electronically to HMRC, with the document production code being the beginning of the title of the email as per paragraph 77.74:

EDNCR – early discharge and combined release notice  (not applicable where the bankruptcy order is made on or after 1 October 2013)

EDNOT – early discharge notice (not applicable where the bankruptcy order is made on or after 1 October 2013)

EDOBJ – early release objection info request (not applicable where the bankruptcy order is made on or after 1 October 2013)

NABO – annulment notice

NFM – notice of 1st meeting

NGM – notice of general meeting

NNM – no meeting notice

NORAD – notice of release and dividend

RTC – report to creditors

PEN – public examination notice

 

77.76 Sending statutory notices by email

At the moment it is not possible to email a document directly when generating the document in ISCIS.  Statutory notices can be sent electronically by generating the required form in ISCIS in the usual way, and submitting it to the Wisdom file plan.  An email can then be generated from within Wisdom by:

(a)   Clicking on the (drop down menu) next to the document reference number and selecting “Email Document”.

(b)   Entering the email address carole.nichols@hmrc.gsi.gov.uk in the “To” box.

(c)   Ensure that “send documents as attachment” is ticked.

(d)   Ensure that the correct email title is in the subject box (see paragraph 77.74).

(e)   Click “Send”.

Whilst there is nothing to indicate within Wisdom that a document has been emailed, there is an Audit Search function that can identify documents that have been emailed.

 

77.77 Where correspondence sent electronically to HMRC in error

If correspondence not required by ICHU is received in error, this would stay in the email account and will be returned by email to the sender.

 

77.78 E-mail address for sending TNIDIS

(amended January 2014)

HMRC have advised that where a no tax (NT) code is issued for the year of the bankruptcy (see paragraph 77.23), it is possible that a further copy of the bankrupt’s authority [note 4] may be requested to process a refund due for the period between the date of the bankruptcy order and the date the NT code is processed.  To avoid this happening, official receivers should send all copy TNIDIS forms (in Word or pdf format) to:

Tnidis.ptopsbankruptcy@hmrc.gsi.gov.uk

A copy of the form should be saved by the official receiver to the office file.

 

77.79 Annulment notification – payment in full

When notifying HMRC of any matters relating to payment in full annulments (see Chapter 6A, Part 3), the notice or communication should be sent to the ICHU contact listed under HMRC within the Partnership Agreement, Appendix A on the ORBS intranet site.

 

77.80 Annulment notification – ought not to have been made

Any matters relating to ought not to have been made annulments on HMRC petitions should be addressed directly to the caseworker, contact details of which are shown on the information sheet provided by Enforcement and Insolvency Service (Worthing) with the initial petition information, see paragraph 77.22A.  

Where HMRC are not the petitioner it will not be necessary to contact HMRC.

The relevant tax reference numbers should be included with all requests.

 

77.81 First enquiries to obtain PAYE/NIC (direct taxes) information

The partnership agreement with HMRC (see paragraph 77.63) states that the official receiver will only request information from HMRC to support his/her public functions. These include investigation for the purpose of pursuing a disqualification, bankruptcy restriction order, or submitting a statement of facts, or for statistical and planning purposes.  For information on initial enquiries, see Part 2, paragraph 77.22A to C.

When information is required about a taxpayer's affairs (company or individual), a first enquiry should be made to the local tax office (Debt Pursuit Office); that is the one which handles, or has handled, the bankrupt's or companies tax affairs.  Enquiries to the local tax office should be made on the relevant letter template, Annex A for bankruptcy cases, Annex B for company cases where the official receiver is liquidator, and Annex C for company cases in which an insolvency practitioner is voluntary liquidator.

If the local Debt Pursuit Office is unknown, or fails to reply to the first enquiry letter, it should be referred to the Enforcement and Insolvency Service office in Worthing for reply (see the HMRC Partnership Agreement, Appendix A and paragraph 77.83). This address should also be used where HMRC are the petitioning creditor (see paragraph 77.88 for the address).

 

77.82 Contents of first enquiry letters to HMRC

Following the agreement with HMRC, where HMRC are the petitioning creditor the official receiver should make requests for information in two stages, and in the first stage only the following information should be requested:

(a) Details of amounts outstanding at the date of the insolvency order.

(b) Type of tax the debt relates to.

(c) Period the debt relates to.

HMRC Enforcement and Insolvency Service has agreed to send a BROCS print out with the response to the first enquiry letter (see paragraph 77.81) (which will also include VAT ledgers where appropriate (see Chapter 78, paragraph 78.47).  A BROCS print out is a print out from the HMRC banking operations computer system.  See paragraph 77.93 for guidance on interpreting information sent by HMRC.

 

77.83 Enquiries where details of the local tax office are not known

If the local tax office is unknown, the information detailed in paragraph 77.82 above can be requested from the HMRC Enforcement and Insolvency Service in Worthing (using the DDU1 letter template available on document production as appropriate), but the letter must clearly state that the information is being sought from Worthing as the tax office location is unknown.  The document production template DDU1 should also be used for first enquiries if HMRC are the petitioning creditor.  These enquiries should be sent to Worthing by secure email, to eisw.insolvency@hmrc.gsi.gov.uk , see paragraph 77.88 

 

77.84 Deletion of duplicate information from letters

If the standard letter duplicates information that is already held, e.g. where  HMRC have petitioned and provided claim details, that request should be deleted from the standard letter before sending.  Document production template DDU1 also contains a request for VAT information which should be deleted if it is known the trader was not VAT registered.

 

77.85 Length of tax histories to be requested

The official receiver will not routinely request tax histories covering more than three years prior to the winding up or bankruptcy order. Where it is necessary to request tax histories exceeding this three year period, the official receiver should explain the reasons for this when submitting the request. HMRC will consider such requests on a case by case basis.

 

77.86 Second enquiry letter to HMRC

If after an examiner has interpreted the BROCS print outs (and VAT ledgers) sent by HMRC (see paragraph 77.82 above), and it is considered that the case warrants further investigation, then a second letter should be sent requesting additional information (see paragraph 77.87 below).  The second letters should be addressed to the individual at HMRC named in the initial response.

 

77.87 Second enquiry letter

The second letter should be drafted by the examiner and tailored to the information required.  The letter should explain why the additional information is required and additional requests should be in line with the disclosure guidance in the Partnership Agreement (available on the ORBS intranet site).    Additional information must not be requested as a matter of routine.

In accordance with the partnership agreement (see paragraph 77.63), if HMRC Enforcement and Insolvency Service (Worthing) receive correspondence seeking detailed information but have not received a first enquiry letter (see paragraph 77.81), they will treat the request as if it is a first stage request and only provide the information they would normally provide in response to the first letter.

 

77.88 Address for first and second enquiries of Worthing

From 1st April 2012 all investigation enquiries sent to the Enforcement and Insolvency Team in Worthing should now be sent by secure email (gsi) to eisw.insolvency@hmrc.gsi.gov.uk. The email subject heading should follow a standard format and either begin with DD1, DD2, BRU1 or BRU2 according to whether it is a first or second enquiry, and relating to either a potential disqualification or bankruptcy restriction. The case name should also be included in the email title.

The email should have two attachments, the standard template letter setting out the information requested (see paragraph 77.82 above), or the second letter addressed to the individual named in the initial response received, and, if appropriate, the letter of authority from the insolvency practitioner liquidator.

 

77.89 Timescales for reply

HMRC will respond to requests for information within 30 working days of receipt of the email or hard copy letter, or within 15 working day for PIU cases.  The response will either be the provision of information relevant to the enquiry or an explanation why the request cannot be fulfilled.  HMRC will issue responses through the DX system due to the volume of paperwork likely to be involved.

 

77.90 Reminder letters

The official receiver should not send reminder letters chasing a reply to the enquiry until the 30 or 15 working days has elapsed as appropriate.

 

77.91 Keeping HMRC informed of case interest

Caseworkers at the HMRC Enforcement and Insolvency Service have requested that official receiver staff contact them when the official receiver no longer has an interest in a case, which will enable them to close cases down and move onto other work.  In successful further investigation cases where HMRC have provided information, HMRC Enforcement and Insolvency Service (Worthing) should be sent a copy of the further report to creditors issued, see paragraph 77.92 for address.

 

77.92 Report following a successful investigation

Where the official receiver's investigation ultimately results in a successful conclusion to a criminal allegation, or a disqualification order or a bankruptcy restrictions order being made, the official receiver must issue a further report (see Chapter 18, paragraph 18.21). This report [note 5] should be sent to the caseworker who has provided the official receiver with information, at:

HM Revenue and Customs,

Enforcement and Insolvency Service,

Durrington Bridge House,

Worthing, BN12 4SE

This report details the result of The Service’s investigations, the conclusion of which may have been assisted by the information supplied by HMRC.

The report should not be sent to ICHU, as ICHU only deal with insolvency claims.

 

77.93 Interpretation of information received from HMRC

Two members of staff from each official receiver’s office have been trained in interpreting the VAT ledgers received from HMRC. It is for each office to arrange the cascading of that training to other members of staff within their own office. The PowerPoint presentation from that training session is annexed to Chapter 78.  There is also a Guide to Interpreting HMRC Ledgers (including a list of BROCS codes) available on the People Learning and Development site which will assist staff interpret the BROCS print outs containing the PAYE/NIC (direct tax) information sent by HMRC.

The following link provides some guidance on the terms and acronyms used by HMRC which may assist in interpreting the information supplied by HMRC  http://search.hmrc.gov.uk/kb5/hmrc/hmrc/results.page?qt=Glossary

 

77.94 PAYE coding notices received in error

If the official receiver receives a PAYE coding notice or self assessment tax calculation relating to a bankrupt, it should be returned to the HMRC NI and PAYE Services address listed in the Partnership Agreement, Appendix A available on the ORBS intranet site.

 

77.95 Online self-assessment 

On occasions, the official receiver will receive a letter from HMRC containing a user ID and activation PIN in respect of an insolvent who has submitted an online tax return. The letter will usually show the official receiver (as the person in charge of the bankrupt’s affairs), and won’t contain reference to the bankrupt. These letters are issued where the bankrupt has registered to file his/her tax return online for the year of his/her bankruptcy.

Where an individual has been made bankrupt he/she is no longer permitted to use online self assessment. Any self assessments must be completed manually during the period of an individuals bankruptcy.

If any such letters are received by official receivers, these should be forwarded under cover of a compliments slip to the Live Online Service Team listed in the Partnership Agreement, Appendix A available on the ORBS site. 

 

77.96 Secretary of State appointments where HMRC are creditors (amended February 2014)

HMRC prefer a Secretary of State appointment to be made from the OR’s rota. This is the case unless HMRC are the petitioning creditor and specific instruction is given in the petition as to the appointment of an insolvency practitioner. 

If, in exceptional circumstances, HMRC’s consent is to be sought for an appointment when they are not the majority creditor, contact should be made via the General Insolvency Help Line is 03000 519911. See Chapter 17 paragraph 17.67.

See also paragraph 10.8 of the Partnership Agreement between HMRC and The Insolvency Service by clicking here.

 

77.97 Undeclared directors’ remuneration

Official receivers should notify HMRC in cases where there is an apparent failure to operate PAYE on directors’ remuneration.  HMRC’s approach to this area of work is organised on a national basis, with a network of Specialist Investigation offices operating to identify those instances where the director has had an involvement to ensure that his or her remuneration is not paid free of PAYE and Class 1 NIC deductions.

In such cases, HMRC will wish to;

examine the wages and tax records (if they exist) and other company documents and records relating to the calculation or payment of earnings and deductions, e.g. cash books and cheque stubs (in accordance with their normal inspection powers in respect of employers); and

review their claim in the company liquidation, then either: 

lodge a claim for any additional PAYE/NICs; or

forego any claim or part claim (thereby benefiting other creditors) by using regulations to make the director (rather than the company) personally liable for the debt.        

 

77.98 When to inform HMRC of potential undeclared director’s remunerations

Official receivers should contact one of the named contacts in the Partnership Agreement, Appendix A on the ORBS intranet site in cases where there may be undeclared director’s remuneration, and a resulting failure to operate PAYE.  The decision as to whether one of the Specialist Investigation Officers should be contacted, would in most cases be made at the CAR B submission stage. There does not need to be evidence of, only a suspicion of, undeclared director’s remunerations for HMRC to be contacted to discuss the case. HMRC will then decide whether to pursue the matter (see the Partnership Agreement for more guidance).

Official receivers should not undertake any further work to identify potential undeclared director’s remunerations, other than that which would normally be undertaken to examine the financial records and reach an investigation decision.

 

77.99 What to look for when deciding whether to advise HMRC of potential undeclared director’s remunerations

In broad terms, the type of case HMRC would be interested in being advised of are cases where the prime records show that;

the director has made regular money withdrawals (usually in round sums) without the apparent deduction of PAYE/NIC; and/or

payments have been made to third parties in settlement of the director’s personal liabilities.

The Specialist Investigation Office will consider the information provided by the official receiver, and in most cases will make arrangements to visit the official receiver to discuss the case and view the records.

HMRC recognises the potential for money withdrawals to be debited to a loan account already in credit, or for the money withdrawals to be described as dividends. If the examination of the case has already identified this possibility, the official receiver should bring this to the notice of the Specialist Investigation Office caseworker.

 

77.100 Data protection and disclosure of potential undeclared dividends to HMRC

The Service is satisfied that there is no Data Protection Act consequences or breaches of confidentiality in the official receiver informing HMRC that it is a creditor, and disclosing ordinary records and information relating to HMRC’s claim.

However, nothing in this guidance should be taken to affect any duty of confidentiality on the official receiver in respect of information, and/or documents which have been obtained pursuant to sections 235 and 236 of the Insolvency Act 1986. Any disclosure request of this information of this nature will have to be considered by the official receiver separately. See Chapter 81A for more information on Data Protection. 

 

77.101 Form of proof of debt

Proofs of debt submitted by government departments need not be in the strict form prescribed by the Insolvency Rules 1986, provided that the proof contains all such particulars of the debt as are required in the form used by other creditors and as are relevant in the circumstances [note 6]. For further information of proofs of debt see Chapter 16, Part 5.

 

77.102 Amount claimed on proof of debt

A proof may be lodged for all the tax liabilities and revenue debts existing at the date of the insolvency order, irrespective of when they are due and payable. Such liabilities include sums due from the insolvent on account of deductions of income tax from emoluments paid and in respect of deductions from payments to subcontractors in the construction industry.

 

77.103 HMRC – provisional claims

If HMRC is awaiting receipt of a bankrupt’s self assessment return, there may be a delay before a claim can be notified to the official receiver or the claim may have to be based on incomplete information. To overcome such difficulties, in cases where there is to be a distribution to creditors, especially in the early stages of a case, HMRC will submit a provisional claim (taking into account any payments of tax made) based on historic information. Although a proof of debt may be based on an estimated assessment(s), the tax is legally due and payable on the due date. It is final and conclusive unless an appeal has been made within the statutory 30 day period. Accordingly, it should generally be accepted as part of a claim for voting purposes but this does not affect the chairman's right to reject proofs of debt not considered to be valid [note 7].

 

77.104 Form of proof of debt in pre 15 September 2003 cases

In cases where the petition was presented on or after 15 September 2003, HMRC have no general preferential status. The Enterprise Act 2002 amends Schedule 6 to limit those creditors that will be entitled to make a preferential claim [note 8].

In cases where the winding up order or bankruptcy order was made prior to 15 September 2003, a debt to HMRC is considered to be preferential when it constitutes :-

Sums due at the relevant date from the debtor on account of deductions of income tax from emoluments paid during the period of 12 months next before that date. The deductions referred to are PAYE deductions that the debtor was liable to make less the amount of the repayments of income tax which the debtor was liable to make during that period, and

Sums due at the relevant date from the debtor in respect of deductions required to be made in the same period under the construction industry subcontractors scheme.

 

77.105 Excessive claims in proofs of debt

Where a proof of debt is lodged by HMRC but it is claimed that;

the bankrupt had no income or capital gains assessable for the year concerned, or

the company had no liability to tax, or

the bankrupt or company consider the assessments to be excessive;

HMRC will forego as much of the claim as appears to them to be excessive on receipt of the following;

an affidavit by the bankrupt or, for companies, by the secretary or other officer of the company, setting out the grounds of the claim.

where an affidavit by the bankrupt or company officer cannot be obtained, a certificate by the trustee or liquidator may be submitted instead but this must also explain the reasons for failure to furnish an affidavit [note 9].

 

77.106 Bankrupt to claim any tax relief  

Relief from tax on account of personal allowances or other reliefs should be claimed by the bankrupt using forms available from HMRC. Where claims for relief cannot be obtained from the bankrupt, HMRC may accept a certificate by the trustee [note 9] provided this includes the information necessary for HMRC to determine a claim. Any waiver of claim referred to above does not extend to tax which the bankrupt or company was entitled to deduct from any interest paid from money, annuities, royalties or any other sums paid in respect of a patent or copyright or other annual payment from which tax should have been deducted.

 

77.107 Early discharge IPO questionnaire and P45/P60 forms

(updated October 2013)

The early discharge process does not apply to cases where the bankruptcy order was made on or after 1 October 2013 ( see Chapter 22 Part 2). To assist with the early discharge process in those cases where it does apply, HMRC have confirmed that they can issue copies of P45/P60’s where they have written authorisation from the taxpayer [note 4] to supply the official receiver with tax information. This will provide the official receiver with information on the bankrupt’s income and assist with the final IPO/A assessment (see Chapter 22, paragraph 22.13EA).

Requests for such information may be sent to the following address:

HM Revenue & Customs

Pay As You Earn

PO Box 1970

Liverpool

L75 1WX

 

77.108 Books and papers destruction notification

The Books and Papers Destruction Form [note 10] informs HMRC of the official receiver’s intention to dispose of books and papers, and provides HMRC with an opportunity to postpone destruction if required.  It is sent to the local HMRC office prior to the destruction of any records, see the Case Help Manual part on Books and Papers, Receipt, Handling, Recording, Destruction. If the local HMRC office is not known the form should not be sent to the ICHU, but to the local inspector by reference to the insolvent’s trading address or residential address where the bankrupt has not traded, see paragraph 77.33A.

 

77.109 The Insolvency Service contact with HMRC

Regular meetings take place between The Insolvency Service (ORBS, Service Delivery Team) and HMRC to discuss problems encountered by the official receiver with the aim of resolving them at the earliest opportunity.

 

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