Insolvency technical update: February 2024
By Steven Wood, Practice Support Specialist (Insolvency)
12 March 2024
Read our latest insolvency technical update – your round-up of the recent developments in insolvency.
The Bankruptcy (Scotland) Amendment Regulations 2024
The above regulations have been laid and will come into force on 6 April 2024.
The regulations amend regulation 26 of the Bankruptcy (Scotland) Regulations 2016, which prescribes the rate of interest payable on creditors’ claims in sequestration (bankruptcy) under section 129(10)(a) of the Bankruptcy (Scotland) Act 2016 (‘the 2016 Act’), where there are sufficient funds to settle those claims in full. This interest is payable for the period from the date of sequestration until the creditors’ claims are paid.
Section 129(10) of the 2016 Act currently specifies that the rate of interest payable is the greater of:
a) The prescribed rate at the date of sequestration
b) The rate applicable to that debt apart from the sequestration
Currently, the prescribed rate of interest is a fixed percentage of 8% per annum. The regulations will amend the mechanism for calculation of the prescribed rate of interest from a fixed percentage to a rate more closely aligned to the prevailing rate of interest at the date of sequestration.
It will be based on the Bank of England base rate at the date of sequestration, plus 2% to compensate creditors for delays in recovering sums due to them. However, creditors will continue to be entitled to interest at their contractual rate if this is greater than the prescribed rate.
The amended prescribed rate will only be applicable in cases where the date of sequestration falls on or after the date the regulations come into force (6 April 2024).
VAT groups and insolvent companies
HMRC’s approach to how it treats insolvent members of a VAT Group has changed.
HMRC will no longer automatically remove insolvent members from VAT groups and allow them to join as long as control conditions are met. The change will “not be retrospective and will take effect from 22 January 2024”.
HMRC insolvency guidance: Tax returns and payments in administrations – correction
HMRC has issued a correction to its guidance on tax returns and payments in administration, previously issued on 17 January.
The Economic Crime and Corporate Transparency Act 2023: Companies House changes
The first measures under the Economic Crime and Corporate Transparency Act 2023 came into force on 4 March 2024. Changes introduced include:
- Greater powers to query information and request supporting evidence.
- Stronger checks on company names.
- New rules for registered office addresses (all companies must have an appropriate address at all times - they will not be able to use a PO Box as their registered office address).
- A requirement for all companies to supply a registered email address.
- A requirement for subscribers to confirm they are forming a company for a lawful purpose when they incorporate, and for a company to confirm its intended future activities will be lawful on its confirmation statement.
- Greater powers to tackle and remove factually inaccurate information.
- The ability to share data with other government departments and law enforcement agencies.
Changes to Companies House fees
Companies House fees are increasing from 1 May 2024. A table setting out the new fees has been published.
Money laundering advisory notice: High-risk third countries
On 23 February 2024, the Financial Action Task Force (FATF) published the most recent updates to its lists of jurisdictions identified as having strategic deficiencies in their AML/CTF regimes.
The lists set out jurisdictions considered ‘high-risk third countries’ as defined by regulation 33 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the MLRs), in respect of which the UK regulated sector are required to apply enhanced customer due diligence.
The full updated list can be found at ‘Jurisdictions under increased monitoring’ and ‘High-risk jurisdictions subject to a call for action’.
The Employment Rights (Increase of Limits) Order 2024
The above Order will come into force on 6 April 2024.
The Order increases the limits (maximum or minimum) applying to certain awards of employment tribunals and other amounts payable under employment legislation, as specified in the schedule to the Order.
For individuals made redundant on or after 6 April 2024, their weekly pay will be capped at £700, up from £643.
Water industry legislation
A raft of statutory instruments have recently been made to update the legislation governing special administrations for regulated water companies in England and Wales. The new legislation provides more options and flexibility for the restructuring of water companies. The relevant legislation is:
- The Water Industry (Special Administration) Regulations 2024
- The Water Industry (Special Administration) (England and Wales) Rules 2024
- The Water Industry Act 1991 (Amendment) Order 2024
- The Flood and Water Management Act 2010 (Commencement No. 10) Order 2024
INSSight: A new case management system from the Insolvency Service
The Insolvency Service has issued a communication providing insolvency practitioners with information on its new case management system. Phase one of the new system will be delivered later ithis year.
Legal update
Chad Griffin and Thomas Campbell MacLennan as joint administrators of Alexander Inglis and Son Limited for an order in terms of paragraph 79 of schedule B1 to the Insolvency Act 1986: A recent Court of Session judgment that provides some useful clarification and guidance around concluding an administration via a court winding-up and the court’s powers in relation to advance remuneration requests.
