With the anticipated appeal in Novalpina having been heard at the end of last month, practitioners will be watching closely to see what the courts have in store for solvent liquidations. In particular, there remains considerable interest in whether the first instance findings concerning the requirement to pay all debts, together with statutory interest, within 12 months of the commencement of the MVL will be upheld. Equally important is how the court may address the practical challenges posed by disputed or contingent liabilities.
While the profession awaits the outcome, HMRC has published updated guidance outlining its expectations for the treatment of a company’s tax affairs both before and during the MVL process. The guidance provides a clear timetable indicating what insolvency practitioners can expect from HMRC and what HMRC expects in return. Much of the content will be familiar, reflecting principles set out in previous publications, but it is helpful to have the information consolidated in a single source.
The guidance also contains a notable reminder for practitioners. HMRC makes it clear that waiting for HMRC to submit a claim will not, in itself, constitute a reasonable explanation for exceeding the 12-month period. Read alongside the wider guidance, this reinforces the importance of ensuring that a company’s tax affairs are as up to date as possible before embarking on an MVL.
That is not to say that outstanding tax matters cannot be resolved after the liquidation has commenced. The guidance expressly recognises that final returns and liabilities may be dealt with during the MVL process and provides indicative timescales for doing so. However, where tax matters remain unresolved at the outset, practitioners may find themselves operating within an increasingly compressed timeframe to quantify liabilities and make payment before the expiry of the 12-month period.
Provided HMRC can respond in the timeframes outlined, the process should be manageable. However, the guidance itself acknowledges that delays can occur and, as practitioners know from experience, even well-planned cases do not always proceed entirely according to timetable. In that context, the renewed emphasis on pre-appointment tax compliance may prove to be one of the most significant practical messages arising from the latest guidance.
The latest guidance is discussed in our MVL alert which covers other important aspects of the MVL process, such as the declaration of solvency.
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