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Door opens to VAT refunds for IVAs 1 September 2011

RPBs issued the guidance on the implications of a court case launched by IVA provider Paymex against HM Revenue and Customs (HMRC). Paymex argued that both nominees’ and supervisors’ fees should be exempt from VAT and earlier this year the company scored a victory in court over its case.

The Insolvency Practitioners’ Association (IPA) and its counterparts have offered practical guidance on the case and they have told IPs that the Paymex ruling means that VAT on previous IVA invoices for fees has been charged erroneously.

In its guidance the IPA said: “We believe IPs should take all appropriate measures to remedy the position for the benefit of creditors.”

The RPB has advised that it is “the office holder’s duty” to maximise realisations requires a supervisor to seek recovery of sums which are due to the estate.

IPs have also been warned over creditors’ expectations and the exposure to action by creditors if claims are not made. The IPA said it is seeking legal advice on whether supervisors are obliged to seek refunds where the recovery would be negligible. It is also asking lawyers for their opinion on whether an IP’s duty to seek refunds applies to completed IVAs.

The RPBs have also told IPs that their firms should stop charging VAT on invoices for fees and disbursements in IVAs immediately.

HMRC has also given guidance itself on how claims for refunds can be made by IPs. The crown’s refunds will involve paying a net sum comprising output tax wrongly charged on cases; input tax wrongly reclaimed on cases; and input tax wrongly reclaimed because of partial exemption rules.

HMRC has also confirmed that once refunds have been paid into the estates, the normal IVA procedures apply and office holders may be remunerated out of estate money, in accordance with the IVA terms.
The IPA said its guidance offers practical advice, but does not constitute legal advice.

HMRC said the case between Paymex and HMRC did not extend to company voluntary arrangements or partnership voluntary arrangements. 

 

 

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