Key tax considerations relevant to company voluntary arrangements (CVAs) with creditors
Produced in partnership with Anthony Davis and Julia Fox of Deloitte LLP
Key tax considerations relevant to company voluntary arrangements (CVAs) with creditors

The following Tax guidance note Produced in partnership with Anthony Davis and Julia Fox of Deloitte LLP provides comprehensive and up to date legal information covering:

  • Key tax considerations relevant to company voluntary arrangements (CVAs) with creditors
  • What is a CVA?
  • Debtor and creditors
  • Debtor company’s tax position
  • What are pre-CVA tax debts?
  • Effect of a CVA moratorium
  • Debtor’s tax treatment if pre-CVA tax debts released
  • Corporate creditor’s tax treatment if pre-CVA tax debts released
  • Tax on profits arising during the CVA implementation
  • Transfers of assets to creditors and ‘trusts’
  • more

This Practice Note outlines the main tax implications where a company implements a company voluntary arrangement (CVA) under Part I of the Insolvency Act 1986 (IA 1986).

The CVA may follow a formal insolvency process (usually, an administration and, in some circumstances, a liquidation) and represent an exit route from such insolvency process, or it may run concurrently with the continuation of the insolvency process.

For more information on the tax considerations relevant to an administration, see Practice Note: Key tax consequences of an administration. For more information on insolvent liquidations, see Practice Note: Key tax consequences of an insolvent liquidation.

An arrangement may also be made informally, by a contract, between the creditor and debtor.

There are also other statutory processes that can involve formal arrangements with creditors and shareholders, including:

  1. a demerger under IA 1986, s 110 (also referred to as a section 110 arrangement or a liquidation demerger), which broadly provides for a liquidator to transfer the assets of a company (company A) to other companies owned by company A’s shareholders in exchange for new shares issued by the other companies to the shareholders of company A—for a detailed discussion of section 110 arrangements generally, see Practice Note: Insolvency Act 1986 s 110 arrangements and for the tax aspects, see Practice Note: Liquidation demergers, and

  2. Part 26 of the Companies Act 2006