Personal insolvency

General

There are two main types of insolvency procedure applicable to individuals:

  1. individual voluntary arrangements, and

  2. bankruptcy

Individual insolvency is:

  1. governed by the Insolvency Act 1986 and the Insolvency (England and Wales) Rules 2016 (IR 2016), SI 2016/1024, and

  2. subject to the supervision of the High Court (Chancery Division) or designated county courts

Individual voluntary arrangements (IVAs)

An IVA allows an insolvent debtor to obtain a moratorium on their debts and to repay their creditors in a structured way. It is overseen by a nominee, who must be a qualified insolvency practitioner, and may be structured as:

  1. a composition in satisfaction of the debts, or

  2. a scheme of arrangement

The nominee prepares a proposal for the IVA, setting out what payments are to be made and from what assets. This must be approved by 75% or more of creditors. Once approved, the nominee becomes the supervisor of the arrangement, and any bankruptcy is annulled. All creditors who could vote at the meeting are bound.

The supervisor administers the IVA, paying monies to creditors as agreed. The supervisor must

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All in? Court confirms when a settlement is 'made' for the purposes of excluded property (Accuro Trust (Switzerland) SA v The Commissioners for HMRC)

Private Client analysis: This case considered the meaning of 'relevant property' under the settlements regime of the Inheritance Tax Act 1984 (IHTA 1984) and, in particular, the time at which this definition is to be tested. The question arose as to whether the trustees of an offshore trust established by a non-UK domiciled settlor were subject to the UK settlements regime in respect of property added to the trust after the settlor became deemed domiciled in the UK, or whether they were exempt from such charges as the trust consisted solely of excluded property. The First-tier Tribunal (FTT) held that whether trust property is excluded property is based on the status of the trust at the time that it was established, not at the time that the property in question was added to the settlement. As a result, the trust in this case did consist solely of excluded property and no inheritance tax (IHT) charges arose as a result of either the ten-year anniversary or capital distributions. The FTT was also asked to consider whether their jurisdiction was appellate, or supervisory only. The FTT held that, while their jurisdiction was supervisory, the questions raised by the trustees were relevant in establishing whether HMRC had acted reasonably and that the outcome (ie that the paid IHT should be refunded and that no further IHT was due) would be the same in either case. Written by Katherine Willmott, senior associate solicitor at Foot Anstey LLP.

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