Statutory Interest in Members Voluntary Liquidations

As you may be aware, several months ago HMRC transferred the responsibility of dealing with solvent liquidations (or MVLs) from their offices in Worthing to a new department based in Edinburgh. Whilst this upheaval and the requirement to train the new staff has caused delays for liquidators in being unable to receive the necessary tax clearance letters from HMRC in a timely manner, it has also potentially led to a change in accepted historical practice in relation to Statutory Interest. The change may also be attributed to a ruling in the long running Lehman Brothers International (Europe) case that sought to establish how the eventual surplus in the administration should be split. Here, David Richards ruled that, in the administration, statutory interest was payable on future and contingent debts from the date of the commencement of the administration rather than when the debts became due.

The historically accepted practice has been to pay HMRC interest at 2.75% for periods from when Corporation Tax becomes due, being the interest payable under Corporation Tax Legislation. This gave the liquidator 9 months from the date of appointment to pay the tax without any interest becoming payable. It is becoming apparent however, that HMRC are now claiming that Statutory Interest is due at 8% for the period from the date of liquidation until the payment of the tax, regardless of when the tax becomes due or in fact the liability has yet been determined.

This change in policy could have consequences on those advising their clients on planning for an MVL. It may therefore be advisable, where at all possible, for corporation tax returns to be submitted and liabilities paid to HMRC prior to the date of liquidation. This avoids statutory interest becoming due and payable in a subsequent liquidation period.

Should you or any clients considering an MVL have any concerns on how this may affect the potential outcome then please contact us. Initial consultations are always free of charge.