Insolvency technical update – November 2021
By Steven Wood, Practice Support Specialist (Insolvency)
2 December 2021
Insolvency technical update – your round-up of recent developments in insolvency
ICAS Insolvency Monitoring Annual Report
The latest ICAS Insolvency Monitoring Annual Report has been published providing a summary of the main findings from Insolvency Practitioner (IP) IP monitoring visits. IPs are encouraged to consider the common findings and reflect whether there are any learning experiences that they find helpful in relation to their own practice.
ICAS Code of Ethics
ICAS is adopting a revised Code of Ethics with effect from 1 January 2022 to incorporate the International Ethics Standards Board for Accountants (IESBA) revisions to promote the role, mindset and behavioural characteristics expected of all professional accountants.
Further information on the proposed changes can be found in an explanatory article on icas.com.
Part 5 of the Code of Ethics, applicable to IPs will not be amended at this time, however ICAS IPs are reminded that Parts 1 and 3 set out the general position which should be applied with Part 5 amplifying the fundamental principles and providing additional material applicable to insolvency practitioners. Accordingly, requirements and application material in Part 1 and Part 3 will take precedence over Part 5 where there is ambiguity or conflict.
Financial Conduct Authority (FCA) Consultation – Debt packagers: proposals for new rules
The FCA has issued a consultation paper seeking views on its proposed new rules to ban debt packagers from receiving referral fees from debt solution providers.
The proposals aim to reduce the risk that consumers receive non-compliant debt advice that is biased towards debt solutions which may not meet their needs but generate referral fees for the debt advice firm.
Responses to the consultation are requested by 22 December 2021. ICAS has commented on the proposals and will publish its full response before the closing date.
HMRC Insolvency Guidance – dedicated Account Manager for insolvency related Customs queries
As part of HMRC’s work to improve the customer journey for IPs, it is introducing a dedicated Account Manager for insolvency related Customs queries.
The mailbox launched on 15 November. Queries should be sent to Phil Taylor at customsclientsupport@hmrc.gov.uk. The e-mail should include INSOLVENCY in the header.
IPs should ensure that they and their staff know the difference between Customs taxes and duties and other taxes (such as PAYE/CT/IT/CGT) so they can direct queries to the correct place.
HMRC Insolvency Guidance - case queries mailbox
HMRC has introduced a dedicated mailbox for insolvency related cases. The mailbox is only to be used when IPs have been unable to obtain a response when using the normal channels despite repeated attempts.
The mailbox is now live. Any case queries should be e-mailed to insolcustservices@hmrc.gov.uk following the instructions in the guidance document and using the contact form for each individual case.
HMRC – VAT 426 team update
Following on from last month’s update, HMRC now advise that the VAT426 Team have been successful in reducing their backlogs and are now working current cases.
There remain some cases that are more complex and require further intervention. IPs will be contacted by the team to resolve these.
Defence Against Money Laundering (DAML) guidance for IPs
The CCAB has approved and published guidance on DAML requests and their relevance to an Insolvency Practitioner.
The guidance relates to DAML requests on truly urgent insolvency matters where there is an intrinsic urgency for an IP to fulfil their duties towards creditors. The guidance also addresses situations where multiple DAML requests are necessary.
As a matter of goodwill, the NCA have agreed to prioritise DAMLs in certain truly urgent insolvency cases, but it is important that this escalation process is reserved for only the most urgent of DAML requests and it does not represent an overall change in the statutory timescales to which the NCA operate.
AiB – reformatted Notes for Guidance
The AiB has published a Dear Trustee letter announcing the publication of reformatted Notes for Guidance for trustees in bankruptcy.
The reformatted Notes follow the bankruptcy process sequentially, in the same way as the Bankruptcy (Scotland) Act 2016.
Some new material has also been added to the Notes. Section 1.5 details the use of electronic signatures in accordance with the Bankruptcy (Miscellaneous Amendments) (Scotland) Regulations 2021. Further, a number of sections been expanded to include information explaining how the AiB processes information and documents received from trustees.
The Diligence against Earnings (Variation) (Scotland) Regulations 2021
The above regulations have been laid before Parliament and come into force on 6 April 2022.
The regulations will uprate the current Diligence against Earnings tables. These tables are used to determine the amount deducted from a person’s wages if they are subject to an earnings arrestment and the amount of funds that are protected from arrestment if a person is subject to a bank arrestment.
AiB DAS Digest
The AiB has published the latest edition of its ‘DAS Digest’. The edition contains:
- Latest statistics
- DAS Team and eDEN updates
- AiB as payments distributor
Energy supplier insolvencies
The Insolvency Service (IS) has written to the RPBs highlighting its expectations of IPs dealing with a large consumer base of vulnerable customers in energy supply insolvencies.
IS are particularly keen to encourage IPs to:
- Actively consider whether previous arrangements that an insolvent energy supplier may have had in place relating to vulnerable consumers, particularly in relation to flexible repayment plans on outstanding debts, should be continued.
- Ensure that all communications with consumers be subject to careful consideration, particularly in providing accurate contact details for customers, and trained staff to deal with a likely high volume of calls.
- Ensure that all communications to consumers avoids the risk of, and concerns about, consumers being scammed or subject to undue pressure.
Ofgem further asked IS to reiterate the importance of the following points.
- The critical importance of providing the incoming supplier (who will be a Supplier of Last Resort (SoLR) in appointments made so far) with the data needed to enable consumers’ experience through the transfer as quickly and smoothly as is possible. This will include systems and billing data, and staffing information, in particular.
- That Ofgem will also be taking a close interest in any fees charged and will wish to be assured that those are fair and reasonable.
- To support the Citizens Advice Extra Help Unit by quickly providing correct staff contact details to help resolve off-supply cases in the SoLR process.
- To remind IPs of the contents of Ofgem’s open letters from 2019 and 2020 in relation to the treatment of customers, and on backbilling.
The Insolvency Practitioners (Recognised Professional Bodies) (Revocation of Recognition) Order (Northern Ireland) 2021
The above Order comes into operation on 6 January 2022.
The Order will revoke the recognition of the Association of Chartered Certified Accountants (ACCA) and the Law Society of Northern Ireland, under Article 350 of the Insolvency (Northern Ireland) Order 1989, as bodies capable of authorising their members to act as insolvency practitioners.
Legal update
Lock v Stanley & Anor (Re Edengate Homes (Butley Hall) Ltd) [2021] EWHC 2970 (Ch): The English High Court dismissed a challenge to a liquidator's decision to assign causes of action originally vested in an insolvent company to a specialist insolvency litigation financing company (via Brodies LLP).
Bass & Ors v Buchanan [2021] EWHC 2740 (Ch): The High Court found that a sole director was liable to pay the liquidators of her company almost £300,000 despite attempting to reclassify the amount showing as a director’s loan account as ‘drawings’.
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