Dear insolvency
practitioner > Chapter 4 > Bonding
1. Requirements for Bonds (Certificate of Enabling Bond) Article withdrawn June 2008 (First published in Dear IP no.27, August 1993, followed by a second publication in Dear IP no 39, October 1997) 2. Insolvency Bond
(First published in Dear IP no.30, March 1994) 3. Insolvency Bond Queries have been raised about the insolvency bond:
(First published in Dear IP no. 27, August 1993) 4.
Ceasing to Act – enabling bond requirements in cases to which the
security provisions of The Insolvency Practitioners Regulations 1990
apply Prior
to the issue of the Millennium edition of Dear IP, in August 1993 the
Insolvency Service suggested that an insolvency practitioner who was
closing cases, prior to his retirement, did not need to renew his
enabling bond. The
suggestion was made as the wording of Regulation 12(1) (a) of the
Insolvency Practitioner Regulations 1990 required the existence of a
bond “at the time when an IP is appointed to act” and a strictly
literal interpretation appears to have been placed on the text of the
regulation when the 1993 article was issued. The article was
subsequently reproduced as one of the questions in article 3 of the
Millennium edition. However,
the Insolvency Service has recently received advice which concludes that
the information provided in that article was incorrect, and that
a purposive interpretation of the regulation should be used in order to
give effect to section 390 (3)(a) of the
Insolvency Act 1986 which provides that an insolvency practitioner can
only be authorised where "there is in force, at any time security,
or in Scotland, caution for the proper performance of his functions
..." . In order to give effect to the primary legislation (being
the higher authority) an
insolvency practitioner is therefore required to have an enabling bond
until he ceases to act as an office holder in relation to any estate. The
earlier article has been withdrawn.
Any
enquiries regarding the above should be directed to telephone: 0207 291 6765; Email:
IPPolicy.Section@insolvency.gov.uk Advice has been sought from HM Revenue & Customs (HMRC) to determine whether insolvency practitioners should apply VAT when re-charging bond premiums to insolvent estates. HMRC advise that VAT should always be charged. HMRC concluded that as the insolvency practitioner is the bond principal, the cost of obtaining the bond forms part of his or her general business overheads rather than a payment incurred on behalf of the estate. Hence bond premiums cannot be viewed as a disbursement for VAT purposes, and are subject to VAT at the same rate as the insolvency practitioner’s other fees. Any enquiries regarding this article should be directed towards Andrew Shore, IP Policy Section, Area 5.7, 21 Bloomsbury Street, London, WC1B 3QW; telephone: 020 7291 6769; email: andrew.shore@insolvency.gov.uk General enquiries may be directed to IPPolicy.Section@insolvency.gov.uk; Telephone: 020 7291 6772 Following the VAT Tribunal decision in Paymex Limited Chapter 4, Article 5 from Dear IP issue no. 37 (published in October 2008) is being republished to take account of the effect of the ruling on voluntary arrangements and Scottish trust deeds. Advice has been sought from HM Revenue & Customs (HMRC) to determine whether insolvency practitioners should apply VAT when re-charging bond premiums to insolvent estates. HMRC advise that VAT should always be charged. HMRC concluded that as the insolvency practitioner is the bond principal, the cost of obtaining the bond forms part of his or her general business overheads rather than a payment incurred on behalf of the estate. Hence bond premiums cannot be viewed as a disbursement for VAT purposes, and are subject to VAT at the same rate as the insolvency practitioner’s other fees. The only exception to the above is in relation to voluntary arrangements and Scottish trust deeds. Following the recent VAT Tribunal decision in the case of Paymex Limited, HMRC has confirmed that insolvency practitioners’ fees in voluntary arrangements and Scottish trust deeds are exempt from VAT. This exemption also applies to the recharging of bond premiums to the insolvent estate in such cases.
Any enquiries regarding this article should be directed towards Steve
Lamb of IP Regulation Section, telephone: 020 7637 6698, General enquiries may be directed to email: IPRegulation.Section@insolvency.gov.uk Telephone 020 7291 6772.
|
||||