Terminal losses and VAT bad debt Relief are often overlooked in insolvent situations but if considered properly could result in increased realisations for the creditors (as well as further work for the accountant).
Crown set off will always need to be considered and if the company has a large tax liability for VAT or PAYE the quantum of these will need to be assessed before any work is started as the Insolvency Practitioner has to ensure a tangible benefit to the estate..
To ensure maximum relief is obtained the following issues need to be considered prior to any insolvency procedure:-
- Key dates for tax purposes
- Corporation tax paid in the 3 or 4 years prior to insolvency
- All tax allowances and reliefs
- Types of charges held
- Assets to be sold by Insolvency Practitioner (possible gains)
- Whether there will be a transfer of business or sale of assets
- Is the company part of a group and other members of that group
- Possibility of deferring liabilities
- Accounting standards adopted
- Centre of main interest (COMI)
- Place of registration of the company
Often the reason for a company’s failure is one large bad debt or a series of problems with customers. VAT bad debt relief is also often overlooked if the business owner prepares his own returns and is not fully conversant with VAT rules.
A global review of taxes should always be considered when advising a client and should you feel there may be a possibility of a claim of any sort, it should be brought to the attention of the Insolvency Practitioner at the earliest opportunity.