Category: Restructuring

Thoughts in advance of the 2023 Autumn Statement

Posted on by Derval Rooney

For many years Autumn Statements did not create much interest outside of economic and political circles. They were more like midterm report cards that would signpost how things were going in the economy, with updates on public spending and borrowing. Since 2018 the plan was for the Budget to take place in the Autumn and then there would be an economic update in the spring to be called the Spring Statement. The theory was to avoid two fiscal events in the same year and to enable Parliament to have more time to debate and review draft fiscal legislation. However, since 2018, the reality has been much less clear cut with a plethora of ad hoc fiscal statements and indeed last year a budget statement reversal after the chaos caused by the Truss/Kwarteng budget statement in September 2022.

On 22nd November 2023 Jeremy Hunt will present his Autumn Statement to Parliament. He will no doubt be relieved that he has survived the recent cabinet reshuffle, but that relief will be significantly tempered by the thought of an election which must take place within the next 15 months. The current opinion polls, the state of the UK and global economies and the fact that the current Government has put in place fiscal measures that have led to the highest tax burden in the UK since the end of the Second World War will mean that any thoughts of job security may be temporary.

So, will the Chancellor make any surprise announcements at the Autumn Statement in a bid to both stimulate the economy and start to reverse the trends in the polls? The general thinking is that he has virtually no room to manoeuvre at the minute. Whilst tax receipts have been extremely buoyant in the last six months due partly to the better-than-expected economic growth but mainly to the impact of the increased tax burden, the impact of inflation on public sector costs and the huge increase in government borrowing interest costs (rising to over £100bn this year) will mean there is virtually nothing in the kitty for any big tax give-aways.

With that in mind, it is always worth looking at what might be included in the statement (or maybe even in the Spring Budget):

Corporation tax rates went from 19% to 25% from 1st April this year (despite the Truss/Kwarteng attempt to reverse this last year). The higher rates will no doubt impact on foreign direct investment, and it may be too early to tell whether the higher rate will result in a higher tax yield. Whilst the natural home for a Conservative Chancellor would be to lower corporation tax rates, one must remember that companies don’t vote and we are too far into the current election cycle for a cut in corporation tax rates to have any significant impact in time for the next election.

Inheritance Tax is regarded as the most hated tax in the UK — effectively paying tax on wealth that has already been subject to income tax and capital gains tax. There were some hints earlier this year that this tax may be subject to a root and branch review and that it would be adjusted so as to take most people out of the inheritance tax net, leaving only the wealthiest subject to it. However, inheritance tax is actually not paid by the majority of people and its dislike is more often about its perceived impact rather than its real impact. Whilst the cost of making some significant changes would not be enormous, it would be seen as handing a tax break to the wealthy at a time of austerity and thus it may not have the electoral impact that would make it worthwhile.

Stamp Duty Land Tax has been around for 20 years now and the rate has steadily increased over that time. There may be merit in a reduction in the rate at the bottom end of the property ladder to not only help stimulate the struggling housing sector but also to encourage younger people to get onto the property ladder. Having said that, with the base interest rates now north of 5% after a decade of interest rates closer to 1%, the reduction in SDLT rates may not give the necessary short term boost to first time buyers.

It is highly unlikely we will see any reduction to income tax rates or national insurance rates, the cost of such reductions would be just too great and any such rate cuts at this time could spark unwelcome movements in the UK government bond market similar to those seen last autumn.

Mr Hunt is between a ‘high tax rock’ and a ‘looming election hard place’. It is hard to see him having any wriggle room just now. However, the November Statement is not quite the last chance saloon, that will be the Budget Statement next spring. I suspect the Chancellor and his government will be keeping their fingers crossed that tax receipts will stay buoyant, global economic factors will enable inflation to fall back further and that interest rates will ease back below 5%. They say a week is a long time in politics but the question is will four months be long enough for the economy to provide a window of opportunity for the Chancellor? Watch this space.

Business Advisory Services – “Calling All Graduates”

Posted on by Rory Moynagh

Due to ongoing growth in our Business Advisory Services Practice (“BAS”), we are now looking to recruit a graduate to join the firm on a 3.5 year training contract, during which time they will undertake professional studies towards becoming a chartered accountant with Chartered Accountants Ireland. The successful candidate will report to the BAS management team and will be involved in the provision of advisory and restructuring services to a wide range of stakeholders, including banks, funds, alternative lenders and corporates. The role will include the following:

  • Provision of professional advice and services to a wide ranging portfolio of clients, to include:
    • Turnaround options advice and business restructuring;
    • Debt and refinancing advice;
    • Accelerated M&A;
    • Independent Business Reviews;
    • Corporate simplification;
    • Corporate insolvency;
    • Personal insolvency;
    • Forensic services, including litigation support, expert witness services and financial investigations; and
    • Business intelligence services.

Essential Criteria

  • Recent graduate with First Class or 2:1 Honours Degree (or equivalent), preferably in finance / accountancy or a business related degree, however all degree types will be considered;
  • Intention to pursue and obtain professional exams;
  • Confident with Microsoft applications including Outlook, Word, Excel and PowerPoint;
  • Excellent communication, presentation and interpersonal skills;
  • High attention to detail and accuracy;
  • Commercial awareness;
  • Strong work ethic;
  • Team player;
  • Proactive and positive approach including ability to use own initiative; and
  • Time management skills.

This is a full time position and will be based in our Belfast office.

To apply for this position please submit a CV by email to careers@hnhgroup.co.uk

Newest Addition to BAS Team

Posted on by Rory Moynagh

HNH are delighted to welcome Matthew Mitchell to our Business Advisory Services team.

A graduate from the University of Ulster, Matthew recently achieved  a first-class honours in Business with Accounting and joins the BAS team as a trainee accountant.

Matthew spent a placement year with Ulster Bank in Belfast and continued to work there part-time alongside his final year studies.

James Neill, Head of BAS, said: “We are delighted that Matthew has agreed to join the team at HNH. His addition to the team, further enhances the strength and breadth of our BAS department”.

Matthew added, “I am delighted to have this brilliant opportunity as a trainee accountant at a dynamic, growing business. I am looking forward to working with experienced individuals, and a variety of people and organisations, whilst garnering expertise in a range of areas.”

Newest Addition to BAS Team

Posted on by Rory Moynagh

HNH are delighted to welcome Caoimhe Sweeney as an Assistant Manager into our Business Advisory Services team.

A law graduate of Queen’s University, Caoimhe then qualified as a chartered accountant while working within Ernst & Young’s tax department.

John Donaldson, Director within Business Advisory Services said, “We are delighted to welcome Caoimhe into our team and believe that her legal and tax experience will be a great addition to the existing skillset within the department.”

Caoimhe said, “I am very excited to begin my new role within HNH and look forward to working with businesses and individuals as they navigate the post-COVID landscape.”

Time to plan for an MVL?

Posted on by Rory Moynagh

Written by Jamie Callaghan

With the Chancellor’s Spring statement fast approaching, those business owners contemplating retiring or exiting their business will no doubt be considering the possible implications for them should the Government announce changes to the Capital Gains Tax (‘CGT’) regime. 

As the Government continues to deal with the aftermath of unprecedented borrowing to support the economy during the pandemic, some consider that CGT could be next on the Chancellors hit-list to raise funds. This could be achieved through the removal of business asset disposal relief (‘BADR’) or, as recommended by the Office of Tax Simplification, increasing the CGT tax rate. 

Business owners can mitigate their risk now by discussing a Members’ Voluntary Liquidation (‘MVL’) with an Insolvency Practitioner to explore whether it is an option suitable for them. 

An MVL is an option for solvent companies wishing to wind down their activities and allows for assets to be distributed in a tax-efficient manner, whilst also giving directors certainty given the finality of the liquidation process. Subject to certain conditions, distributions made in an MVL can qualify as capital distributions and business owners can avail of BADR with a tax rate of 10%. At current rates, this relief can save business owners up to £100,000 in CGT. 

An MVL is only an option for solvent companies meaning that the company must hold enough assets to be able to settle all liabilities and interest in full, normally within 12 months. Due to the ability under company law to hold members’ meetings at short notice, companies can often be placed into an MVL within a couple of days. 

While no-one really knows what the Chancellor’s plans are for CGT come 23rd March and beyond, business owners should always keep one eye on their exit strategy and plan accordingly. This will ensure their company’s activities are wound down in the most efficient possible manner.

A Squash and a ‘Fiscal’ Squeeze

Posted on by Rory Moynagh

Written by Rory Moynagh

If there has one benefit from the past 2 years, it is undoubtedly the opportunity to spend more of those precious moments with our kids. Whether that be the school run, homework or generally just being around more, the pandemic has afforded people the opportunity to reset and perhaps realign those priorities in life.

I’m sure like many, after an excitable day, our kids like to unwind before bedtime with a book.

During a recent reading of Julia Donaldson’s “A Squash and a Squeeze”, I’m sorry to admit, but my mind started to wander as I was reciting the words (almost by memory now at this stage!).

With the increase in hybrid working, I’m sure many might relate to the challenges of space being at a premium in our households at times, however I then began to consider the current fiscal squeeze facing many households.

Fiscal Squeeze

Whether it be rising heating bills, electricity costs, shopping bills, credit cards or fuel costs, the squeeze on household income is very much real.

Coupled with future increases in National Insurance Contributions from 6th April 2022 as well as last week’s announcement of future increases in local property rates, the financial pressure facing households continues to increase.

It was recently reported by the Office for National Statistics (“ONS”) that 76% of people were paying more for food, energy and petrol in the 10 days 3rd February 2022 to 13th February 2022. This was an increase from 69% for the period 19th January 2022 to 30 January 2022. Furthermore, consumer prices also rose by 5.5% in the 12 months to January 2022, the highest since March 1992 (7.1%).

The challenges presented by such inflation cannot be underestimated.

Whilst the Bank of England have attempted to curb the rising levels of inflation by increasing interest rates earlier this month, this will also have an additional knock-on effect on those with tracker or variable rate mortgages, further tightening the squeeze facing many household incomes.

Not Just Households, Businesses Too

Of course, this pressure is not limited to purely households, with many businesses also facing rising costs.

Inflation, Brexit and wider economic and political issues have resulted in increased labour, transport and material costs. The resulting impact on margins has been considerable for many businesses, and whilst many have publicly stated that every effort is being made to avoid passing such cost increases on to the consumer, the above ONS statistics unfortunately confirm the reality that such costs are already being passed on and will likely continue to be in the months ahead.

Plan, Plan, Plan

For both consumers and businesses, the only response to such rising costs is to plan accordingly.

Households should start, or if they already have one, update, their household budget. This will not only help prioritise essential expenditure and manage outgoings, but also highlight any potential areas of concern. Once highlighted, any such problems can then be addressed at an early stage before they become too problematic.

Similarly, businesses should review their business plan and update their financial projections accordingly.

Owners should perform extensive sensitivity analysis under various scenarios and take time to strategise regarding both the pressures currently being faced and the future direction of the business as a result.

Again, early phase planning and review, will help businesses identify any funding gaps or financial pressures, which can then be discussed with stakeholders, banks, funders and / or creditors.

What is important to note however is that no matter how big the problem may seem, there is always professional assistance available to help work through the issues.

Advice

Seeking the assistance of professional advisors to review and critique a household budget, or a business’ operational, financial and strategic plan, could provide the very solution to the current pressures being faced.

There are solutions out there that can provide a chink of light in even the bleakest of situations. What is required is early engagement to identify and address the issue, and a focused and tailored approach to its resolution.

Whilst the past few years have presented their challenges, we all must recognise of how far we have come and what we have all been through. Of course, there will be further challenges ahead and we are all aware that the unprecedented level of Government support during the pandemic will have come at a cost.

However, if we all face this current period with the same approach and determination that we have recently shown, people and businesses can come through this and be in a position to take advantage of future opportunities that present themselves.

The Psychology of Debt: Post Pandemic Impact

Posted on by Derval Rooney

Written by Fiona Elwood

As we begin 2022, it is widely reported that rising living costs are having a financial, emotional and physical impact upon an ever-increasing percentage of the population. With National Insurance set to increase in March and the UK as a whole beginning to feel post pandemic inflationary pressures, one of the UK’s leading Debt Charities, StepChange, have confirmed that one in three people in the UK are struggling to keep up with bills (interestingly this is double the pre-pandemic number). Advice NI, another debt advice charity, has also recently issued a call to ‘encourage everyone to take a look at their finances now to help deal with what’s coming over the next year’. 

In my role as a debt advisory professional, we often meet with people struggling with their finances and in nearly every case the emotional (and physical) side effects of their financial difficulties are clear for us to see.

Whilst most households in Northern Ireland will have mortgages, car loans, personal loans, credit cards along with other essential monthly financial obligations such as childcare costs, It’s important to consider that debt impacts different people in different ways.  One person may suffer severe anxiety owing £1,000 on a credit card whilst another person may consider a credit card bill of ten times that, normal. Debt and financial pressures are not a new issue, but the effects of the pandemic have shone a light on the fact that any amount of debt can have a serious mental health impact. 

The commonly accepted emotional effects of debt include: Depression and Anxiety, Resentment, Denial, Stress, Anger, Frustration, Regret, Shame, Embarrassment and Fear. A recent study by Queen’s University Belfast on the Impact of debt and financial stress on health in Northern Irish households outlined that “neither the size of the debt, the type of debt nor the number of different lenders used affect health whereas the subjective experience of feeling financially stressed has a robust relationship with most aspects of health. In particular, financial stress negatively affects self-care problems, problems with performing usual activities, experiencing pain and feeling anxious or depressed”.

The key advice around resolving financial difficulties is to seek professional help.  When the financial problem is addressed and the appropriate solution is determined and implemented people will often describe more positive feelings such as relief, freedom and accomplishment. The age old saying of a problem shared is a problem halved has never been more true.

We often witness that when an individual begins a process such as bankruptcy or Individual Voluntary Arrangement to resolve the issue, there is a clear sense of relief experienced by the person and it is notably visible. Many of our clients describe the feeling of having a weight lifted from around their shoulders and many describe the day they accept the issue and seek help as being the first day of the rest of their lives. The role of a debt adviser is not the most glamorous of occupations but the ability to make a positive impact on someone’s mental health does make it all worthwhile.

Anyone affected by debt should seek professional advice and also avail of debt counselling to help deal with the mental health impact. StepChange, Advice NI or Christians Against Poverty are just a few of the amazing debt charities providing fantastic support in this area and their work (in an area that often remains unspoken about) should not go unnoticed.

https://www.stepchange.org/

https://capuk.org/

https://www.adviceni.net/

New Addition to BAS Team

Posted on by Rory Moynagh

HNH are delighted to welcome James McMullan to our Business Advisory Services team.

A graduate from Queens, James has recently completed his MBA at the University of Ulster and joins the BAS team as a trainee accountant.

James’ addition brings the overall BAS headcount to over 10 and represents yet further investment in HNH’s BAS offering.

James Neill, Head of BAS, said: “We are delighted that James has agreed to join the team at HNH. His addition to the team, further enhances the strength and breadth of our BAS department”.

James McMullan added: “I’m very pleased to have joined the BAS team at HNH during this exciting period of growth and am looking forward to working with our range of clients on a variety of advisory projects.”

Promotion Announcement

Posted on by Rory Moynagh

We are delighted to announce the promotion of John Donaldson to Director within our Business Advisory Services (BAS) team.

James Neill, Head of BAS & John Donaldson

James Neill, Director and Head of BAS said, “John’s hard work and dedication has been evident from the moment he joined the firm. He is a valuable addition to the HNH Board, bringing with him over 20 years of experience working within the corporate advisory and restructuring space. This promotion continues to demonstrate HNH’s core ethos of providing our clients with experienced, director-led support”.

John added, “Having joined HNH a year and a half ago, I am extremely excited and proud to take up my new position on the Board and look forward to continuing to work with the wider team and our existing clients to further enhance HNH. With the Northern Ireland economy going through a period of constant change over the past couple of years, the experience and depth of the team within HNH, together with our diverse product offering, will put us in a strong position to help our clients deal with the ever evolving marketplace.”

John is a Fellow of the Chartered Accountants Ireland and a licenced Insolvency Practitioner.

HMRC: Collection of tax debts post Covid-19

Posted on by Alison Jones

Further to the policy papers published last year on how to both treat and support those customers with tax debts (https://hnhgroup.co.uk/hmrc-support-customers-fairly/), HMRC have recently published a further policy paper regarding the collection of tax debts post Covid-19.

The full policy paper can be found here.

“At all times, we will take an understanding and supporting approach to dealing with those who have tax debts or are concerned about their ability to pay tax”

HMRC

Continuing the sentiment from their previous communications, it is encouraging that HMRC continue to reference that they “understand that many customers are worried as the financial support schemes start to wind down” and that they “want to offer practice support wherever they can”.

However, whilst HMRC’s tax collection activities were paused and staff redeployed in order to deliver support schemes such as the Coronavirus Job Retention Scheme, HMRC have confirmed that such debt collection work is now being restarted in an effort to support the economic recovery.

HMRC’s message remains: “if you can pay your taxes then you should do so – but if you’re struggling, we want to work with you to agree a plan based on your financial position”.

Early Engagement

Where a business has an outstanding tax debt owed to HMRC, they will firstly try to engage with the business by phone, post or text in order to discuss the situation and agree a way forward. They continue to urge early engagement and response to these communications as soon as possible in order to avoid any further action being taken.

From an advisor / business perspective we can concur that early engagement with HMRC is vital. Not only to ensure cooperation from HMRC, but also to help reduce the accumulation of further interest, penalties and surcharges which can exacerbate the debt level further.

“We want to work with customers to find a way for them to pay off their tax debt as quickly as possible, and in an affordable way for them”

HMRC

Various options are available for businesses, whether that be a Time to Pay repayment plan; a short term deferral; extended repayment terms; or other forms of support such as the Recovery Loan Scheme.

Early engagement affords a business owner with the maximum opportunity to avail of one or more of these options, as well as help mitigating the severity of the situation by limiting the accumulation of additional penalties and surcharges.

Insolvency Moratorium

“We will only consider collecting tax through insolvency proceedings where customers have been found to be fraudulent; deliberately non-compliant; or where they are continuing to accrue debt with no prospect of being able to settle their existing debts”

HMRC

Where customers do not respond to any of their communications, or refuse to pay when they can afford to, HMRC have advised that they may visit the customer at their home or business address.

HMRC have also confirmed that “where customers are unwilling to discuss a payment plan, or where a customer ignores our attempts to contact them, we may start the process of collecting the debt using our enforcement powers”. Such powers include “taking control of goods, summary warrant and court action including insolvency proceedings”.

Whilst at present there remains a restriction on the presentation of statutory demands and winding up petitions, these are due to be relaxed on 30 September 2021. Furthermore, following the previous relaxation of the wrongful trading suspension in June 2021, business owners should continue to be mindful of their duties and engage with all creditors, including HMRC.

Conclusion

As we emerge from lockdown, whilst there is almost certainly a refreshing message from HMRC with regards to doing “all we can to help customers facing temporary financial setbacks” and that enforcement will only be used as a “last resort”, business owners must be cognisant that debt recovery is now firmly back on the government agenda in an effort to rebalance the public purse.

With the relaxation of the insolvency moratorium at the end of next month, creditors will again be able to commence action in recovery of their debts. Whilst HMRC have publically announced they will be sympathetic and understanding in light of the pandemic, such sentiments will not remain indefinitely. Business owners must therefore be aware of the pending challenges and plan accordingly to ensure a full recovery and prosperous future for both them and their businesses.

HNH Promotions and Exam Success

Posted on by Rory Moynagh

It gives us great pleasure to announce some promotions and exam successes within HNH despite continued lockdowns and a somewhat abnormal working environment.

Thomas Horner has been promoted to Manager within our Business Advisory Services (BAS) team and Killian Kiernan has also been promoted to Assistant Manager within the Forensic Services department.

James Neill, Head of BAS, commented:

“The hard work and dedication of both Thomas and Killian has been evident from the moment they joined the firm. Thomas has transitioned seamlessly into the BAS department and his banking experience adds to the skillset within the team, whilst Killian has been and continues to be instrumental to the growth of the HNH Forensic offering.

We are delighted to see them both progress their careers in HNH and further strengthen our client offering.”

In further good news, Jamie Callaghan, also in our BAS department, has successfully passed his Certified Proficiency in Insolvency (CPI) exam with distinction.

It caps a strong period for Jamie who not only became our first trainee to complete his training contract and become a qualified Chartered accountant, but also was promoted to Assistant Manager last March.

“Jamie’s recent successes are a credit to him. The distinction obtained in his CPI’s is no less than he deserves and I look forward to continuing to watch Jamie develop and grow within the firm.

In the uncertain times that we continue to experience, these achievements should not be overlooked and we would like to offer our thorough congratulations to Thomas, Killian and Jamie.

Deal Advisory Openings

Posted on by Rory Moynagh

Due to the buoyant M&A market and with a strong and growing pipeline for FY22, we are seeking to recruit into our Deal Advisory team.

  • – Assistant Manager/ Manager ideally with lead advisory or FDD experience
  • – Chartered Accountant with 2+ years PQE
  • – Based in our Belfast office

For more detailed information on the opportunities, or to submit a CV, please contact us via careers@hnhgroup.co.uk

HMRC: Support Customers Fairly

Posted on by Rory Moynagh

HMRC recently published two policy papers in relation to how they treat and support those customers with tax debts.

This insight into HMRC’s thinking is particularly relevant in light of the current economic circumstances and the impact Covid-19 has had on businesses and households alike. It provides a clearer picture of HMRC’s own view and expectation from customers as we embark on yet another journey of recovery, however this time in the “new normal”.

“We’re here to help”

From across both papers it is certainly notable how supportive and understanding HMRC appear to be to a customers circumstances.

Phrases such as “we want to work with them”, “we want to find a way to help them pay”, “we are always ready to help”, “we do not want out customers to worry” and “we’re not here to make things difficult” are certainly encouraging and provide comfort to those in financial difficulty that HMRC are willing to work with those customers and agree a solution.

What is clear from the policy papers, is that early engagement with HMRC regarding any financial difficulty is vital so that they understand you are simply “unable to pay”, rather than “unwilling to pay”. This is key to avoid further enforcement action being taken by HMRC.

No “one size fits all” approach

Whilst there is no individual solution to a debtor’s financial difficulties, there are a range of solutions available which can assist a debtor, depending on whether the issue is a short-term cashflow constraint or part of a more fundamental solvency concern.

HMRC have stressed that any solution should be affordable and will depend on a customer’s specific circumstances i.e. compliance history, level of debt, level of engagement to date, asset position, earning ability etc.

HMRC are willing to engage with debtors in Time to Pay arrangements to address historic liabilities over an agreed period however the term and repayment amount will differ depending on the above factors. Such Time to Pay arrangements can also include penalties and interest, which if left unaddressed can add significant burden to an already difficult financial situation.

It is undoubtedly true that engaging with HMRC (and indeed all creditors) in a timely manner, ensuring transparency and honesty in all dealings, will ultimately serve beneficial.

It is also important that debtors choose the right solution that is both affordable and addresses the overall financial / solvency issue. Whether this be a Time to Pay arrangement, an IVA / CVA or indeed Company moratorium (introduced under the recent Corporate Insolvency and Governance Act) independent professional advice should be sought at any early stage.

“We urge customers to respond to these communications as soon as possible”

HMRC have stressed that early engagement with them is vital in order to avoid debt enforcement action. The following powers are available to HMRC however they have stated that they will “only use these powers as a last resort”:

As recognised by HMRC, each individual circumstance is different and HMRC’s action will therefore vary accordingly.

However what is certain is that early engagement and independent advice are key to a successful outcome. This may be particularly relevant where HMRC are not the only area of financial pressure. It is therefore vital that any solution selected is therefore the most appropriate in the circumstances.

Senior Appointment to BAS Team

Posted on by Rory Moynagh

HNH are pleased to welcome John Donaldson as an Associate Director into our Business Advisory Services division. John, a Licensed Insolvency Practitioner with over 18 years’ recovery experience, joins from PWC and has worked on some of NI’s largest and most complex restructures. John specialises in providing strategic advice to companies, lenders and various stakeholder groups. 

James Neill, Head of Business Advisory Services, said, “We are delighted to welcome John to our team and, in doing so, bolster the strength in depth we offer at HNH. Our focus has always centred on delivering Director-led advice, with an emphasis on local clients and John’s addition enhances that’.

John added, “I am excited to take up my new role with HNH and look forward to continuing to work with local companies and their stakeholders, helping them navigate through the challenging times ahead”

COVID-19 – The global start-up and the inevitable scramble for liquidity

Posted on by Rory Moynagh

There is no doubt that business owners and directors are in panic mode. This is totally understandable as this type of crisis is unprecedented – there is no tried and tested toolbox of previous experience on which to rely. There are so many questions right now and, honestly, as advisers we are often no better informed.

However, we will get through this and we must use this time wisely to make sure we make informed strategic decisions out the other side. What is certain is that it’s very much a level playing field post COVID-19 and we must all plan for life as a ‘start-up’ regardless of how many years a business has been in existence.

So what does life as a ‘start-up’ look like, what funding is required, where is that funding coming from, why is liquidity key and why is ‘wait and see’ not an option?

Strategies for life post – COVID-19:

  • Build an integrated financial model – Key business decisions are often made on ‘hunches’, ‘gut feels’, ‘split second opportunities’ and some of the very best businesses have been founded on those decisions. However, in uncertain times, good business decisions must be made on an objective, rational basis and fundamentally, upon sound financial reasoning. For too long, recovery has been based on ‘gut feels’, but with multiple stakeholders involved in recovery, the objective of getting all stakeholders to the same ‘feeling’ is often unachievable. Yes, financial models are based on assumptions but if the assumptions are fair and honest then the numbers don’t lie.
  • Stress test your P&L and liquidity – It’s imperative to run sensitivities against your financial model. This might be uncomfortable but you need to know your boundaries for failure and survival. Understand the pinch points and get ready to manage them. You will be surprised how far your historic relationships with customers and suppliers will get you – they often need you as much as you need them!
  • Look after your staff – Fear and panic are debilitating to both business owners and employees and that’s understandable as each have their own worries and personal circumstances to consider but both need each other. Strong leadership and emotional intelligence at this time will drive loyalty and commitment from staff long after COVID-19 has left us.
  • Prepare to succeed – Plan for changes in consumer behaviour and identify new world opportunities.
  • Right size your business – Your business does not need to look the same post COVID-19 as it did pre. It can get back to its original position in time but that does not need to be immediate. I will anger some by saying this but ‘pride and ego’ is not an option right now.
  • Customers – Review your customer segments for liquidity and repayment risk. Yes repairing revenue streams will be important but not at all costs. There will inevitably be failures in the new business environment.
  • Suppliers – Consider de-risking and shortening the supply chain. Your supply chain may be in a location that continues with COVID-19 restrictions when you do not. Use this time to communicate with key suppliers or new potential suppliers to understand their challenges, timescales, credit issues, shipping issues etc.
  • Funding partners – Whether they be debt or equity, communication and support is key. It is a challenging time for all parties given the uncertainty but clear communication of a well thought out financial plan highlighting the impact of COVID-19; the steps taken to date; and the rebuild plan post COVID-19 is the only way to navigate funding structures.

Life as a ‘start-up’ – CBILS, liquidity and other forms of funding

Bank and lenders are currently dealing with a colossal number of requests for moratoriums, CBILS support and any other form of support available. The general feedback from all lenders is that they desperately want to help but despite an 80% guarantee from the government, CBILS still have a number of key criteria that must be met and the lending decision must still make commercial sense. Add to this the sheer volume of requests and remote working and it’s understandable to see why it’s hard for all involved.

Whilst I appreciate there are immediate cash requirements for many businesses, it strikes me that the reality of knowing what quantum of support is required is some time away. There are still too many unknowns and without careful consideration of what the ‘new world’ looks like, it’s nearly impossible to know what support is required.

In essence, lender support in this environment has three key facets. Firstly, to support immediate requirements; secondly, to support the inevitable working capital required in the post COVID-19 workout; and thirdly, the Bank must take reasonable steps to protect its capital.

In panic mode, it’s understandable why borrowers focus on the near term but it’s the medium term that will define business recovery.

We are all essentially ‘starting again’ so how does this affect the normal working capital cycle and why might tools like CBILS be key to helping restart business? In essence, what do we need to consider in funding the working capital of a ‘start-up’ economy?

  • Employees
    • Employees are the one certain cost that must be paid.
    • The JRS has been welcomed with open arms but how does it end? When does it end? Will it be tapered off? Will it end immediately? The reality is we don’t know but we can make assumptions and model accordingly.
  • Customers
    • Customers will no doubt push for extended credit terms.
    • What will consumer spending patterns be and how will this affect turnover? Many will have suffered income losses or job losses which could significantly reduce normal spending patterns.
    • Credit insurance may become more challenging in the market and those that use invoice discounting to fund working capital may have issues with old debts, credit risk and insurance that could impact upon funding or bring new risks to your balance sheet beyond this shock.
  • Suppliers
    • Will supply need to come from a local source and with a new relationship will there come constrained credit terms?
    • Do you need to hold stock in case of a second wave of COVID-19 and what are the working capital and cash implications for attempting to mitigate this risk?
    • Suppliers will want paid up front as they manage their own cash positions and bad debt risk.
    • Logistics/shipping times could continue to be interrupted or delayed depending on the geography of sourcing of your materials and how that location is coming out of lockdown.
  • Capital Expenditure / R&D
    • Is there a requirement to integrate e-commerce / supplier or customer microsites
    • Is IT infrastructure spend required to plan for a second phase of remote working or indeed as a longer term plan for the business?
  • Non-core divestments
    • Do you have non-core assets or businesses in your group that it may be worth considering disposing of to generate cash?
    • Market valuations are likely to be low for assets like this in the immediate term but could planning for this be a method to get a cash injection in the future to focus on core strategic activities?
  • Business interruption claims
    • How long will a claim take? Will the insurer pay out or will litigation be required? How is litigation to be funded?

I’m not sure any of us actually know the answers to each of the questions above. The exact work out will likely become clearer as time progresses but despite these unknowns we must start considering them now and modelling what our own ‘start-ups’ looks like. It’s often said that models aren’t worth the paper they are written on as something always changes. I think in this instance that has in many ways never been truer but without key financial information or scenario analysis how can a business owner ever make an informed decision?

Members’ Voluntary Liquidations

Posted on by Rory Moynagh

Whilst the political and economic landscape in 2019 has continued to be dominated by uncertainty, one option for company directors to manage any uncertainty in the wind down of a company’s affairs is via a Members’ Voluntary Liquidation.

A Members’ Voluntary Liquidation (or “MVL” as it is commonly known) is an option for solvent companies wishing to wind down their activities and allows for assets to be distributed in a tax-efficient manner, whilst also giving directors certainty given the finality of the liquidation process.

An MVL is only an option for solvent companies meaning that the company must hold enough assets to be able to settle all liabilities and interest in full, normally within 12 months. The reference to interest is an important one, given HMRC’s request for 8% statutory interest on all outstanding tax liabilities from the date of liquidation until payment is received.

Why used?

Directors often pursue an MVL for one (or a combination) of the following reasons:

Why would you pursue a Members' Voluntary Liquidation?

Process

Pre – Appointment

A director-led process, an MVL involves the Board resolving to place the company into solvent liquidation and the swearing of an asset and liability statement (known as a “Declaration of Solvency”) for the company confirming that the entity is indeed solvent, and has the ability to satisfy all creditor liabilities plus statutory interest, within 12 months. This is then ratified at a members meeting of the company, following which the entity will formally be placed into liquidation and a liquidator(s) appointed.

Members' Voluntary Liquidation Process

Post – Appointment

Once appointed, the liquidator will wind down the company’s affairs, including the realisation of all company assets, distribution of a dividend to all creditor claims (if any) and dissolution of the entity following receipt of appropriate tax clearance. Whilst a company may be registered in one jurisdiction, it may be tax resident in an alternative jurisdiction, and therefore the resolution of its tax affairs and receipt of appropriate clearance is vital in any MVL.

The winding up of an entity’s affairs by an insolvency practitioner in this manner gives directors and shareholders comfort that the company’s assets and tax affairs have been dealt with appropriately. Statutory notices and public advertisement offers stakeholders a protection mechanism against any future request by creditors to have the entity restored to the company’s register following dissolution.

Tax considerations

Capital Gains v Income Tax

Upon closure of a company by way of an MVL all retained profits are treated as capital rather than income. This means the funds distributed to shareholders should be subject to Capital Gains Tax (“CGT”) rather than income tax.

The headline CGT rate is 20%, however this is reduced to 10% if Entrepreneur’s Relief (“ER”) is available. It should be noted that each distribution in a winding up (e.g. where there is an initial distribution, followed by a final distribution upon completion of the liquidation) is a separate CGT event and therefore the ER conditions will need to be assessed on each separate occasion.

Anti – Avoidance

In recent years, HMRC have been extending the reach of tax anti-avoidance legislation, including the treatment of distributions arising on a winding up. The ‘Transactions In Securities’ (“TIS”) rules have been amended to include such distributions, although there is a mechanism to seek advance clearance from HMRC that they will not apply a TIS counteraction to a given transaction.

Furthermore, a Targeted Anti-Avoidance Rule’ (“TAAR”) was brought in with effect from 6 April 2016 to prevent ‘phoenixism’. The TAAR applies where (in addition to other conditions) the individual receiving the distribution continues to carry on, or be involved with, the same trade or a trade similar to that of the wound up company at any time within two years from the date of the distribution. Unlike the TIS rules, there is no clearance procedure in respect of the anti-phoenixism TAAR.

While the MVL route still offers a return on capital which is subject to relatively low CGT rates, care should be taken with the winding up itself and any other transactions taking place which are (or could be) connected with it under the anti-avoidance legislation.

Alternative 

The alternative to winding down a solvent entity’s affairs is via an application to have the company “struck off” the company’s register. Whilst the “striking off” process is straightforward it does not provide the company directors and shareholders with the same level of protection as the above MVL process. Furthermore, if the distribution in respect of share capital on a striking off exceeds £25,000, for tax purposes the full amount of the distribution will be subject to income tax rather than CGT.

When considering how best to wind down an entity’s affairs, the professional advice of an insolvency practitioner should always be sought.

Contact us


Mark Hood
Director – M&A Taxation
Email: mark@hnhgroup.co.uk
Telephone: 02890 278100

Rory Moynagh HNH
Rory Moynagh

Associate Director
Email: rory@hnhgroup.co.uk
Telephone: 02890 316937

Autumn Budget 2018: Goodbye Austerity … Hello HMRC

Posted on by Alison Jones

Last week the Chancellor made a number of announcements in the Autumn budget, including signalling the end to austerity.

For the restructuring profession one of the most notable announcements was that HMRC will become a secondary preferential creditor for taxes held by companies on behalf of employees and customers (i.e. VAT, PAYE Income Tax, Employee NICs, and Construction Industry Scheme deductions) from April 2020.

The change will not apply for taxes owed by businesses, such as Corporation Tax and Employer NICs.

Currently the only creditors who enjoy preferential status to ordinary unsecured creditors, are the liabilities of former employees in respect of arrears of wages, accrued holiday pay and outstanding pension contributions, up to statutory limits.

As such HMRC presently rank pari-passu (or equally) with all other unsecured creditors in any dividend distribution. Whilst this change doesn’t fully return HMRC to the preferential status it once enjoyed pre 2002 (UK) / 2006 (NI) it does push HMRC higher up the repayment ranking in an insolvency event.

The Chancellor has attempted to defend this change, claiming that it is being made to “ensure that tax which has been collected on behalf of HMRC is actually paid to HMRC”, rather than being distributed to other creditors.

The result of HMRC’s improved ranking will undoubtedly see a reduced dividend paid to unsecured creditors, including lending institutions – where floating charge security will now rank behind HMRC’s new ‘preferential’ status. As such, businesses may experience increased costs of borrowing as lending institutions take into account the enhanced risk and effective devaluation of their floating charge security.

The impact in instances whereby distressed businesses may have in the past received financial assistance from their incumbent lender (as the lender would have taken comfort that such funds would be protected by their floating charge security) remains to be seen.

Whilst it is not clear when these changes will take effect in Northern Ireland, this certainly signals an impending change to the status quo.

 

james
James Neill
Director

Email: james@hnhgroup.co.uk
Telephone: 02890 316934

rory moynagh
Rory Moynagh
Associate Director

Email: rory@hnhgroup.co.uk
Telephone: 02890 316935

Insolvency Reforms Announced

Posted on by Rory Moynagh

In the wake of the liquidation of Carillion, the administration of House of Fraser and a number of high profile CVAs, the Government has announced a number of proposed reforms to the current corporate insolvency and corporate governance frameworks which contain the most significant changes since the 2002 Enterprise Act.
The aim of the reforms is to ensure that companies are given every possible opportunity to be restructured while also ensuring that, where a company is not viable, those in charge of the company act properly and fully discharge their responsibilities. The rights of the distressed company must be adequately balanced against the rights of its creditors and other stakeholders.
The proposed reforms include the introduction of a 28 day moratorium giving viable but financially distressed companies ‘breathing space’ and allowing them to instigate restructuring measures or seek new investment. The company’s directors would remain in control with the support of a supervising Monitor, likely to be an Insolvency Practitioner.
During the period in which the moratorium is in operation, creditors will be prevented from taking action against the company. Crucially, secured creditors may feel the greatest impact as, not only would they be unable to take enforcement action during this period, but in many cases, the costs incurred during the moratorium will be met by assets that would otherwise fall within the scope of their security. The proposed benefit for all creditors, however, is that early intervention is likely to enhance the prospects of meaningful recovery, leaving the company in a better financial state than would be the case without a moratorium.
Also of note for struggling companies and their suppliers, is the proposal that the termination clauses in contracts for supply of goods and services on the grounds triggered by the company’s entry into an insolvency process, will become unenforceable. This may have a significant impact on companies within certain industries and may ultimately increase the restructuring options available.
Other proposed reforms include the introduction of measures to strengthen transparency requirements around group structures and shareholder stewardship, and increased powers of insolvency practitioners in relation to the challenge of schemes designed to extract value from financially distressed companies at the expense of its creditors. Additionally the introduction of the power of the Insolvency Service to investigate directors of dissolved companies in a similar manner to the investigations into the conduct of directors of insolvent entities currently in place have also been proposed.
While the proposed reforms will undoubtedly have an effect on struggling companies and their directors, they are ultimately intended to strengthen the business environment, increase confidence and maintain the reputation of the UK as a fair, transparent and dependable place to do business.

For further information on the proposed reforms, please contact Rachel Foster or James Neill.

Insolvency Reforms Announced

Posted on by Rory Moynagh

In the wake of the liquidation of Carillion, the administration of House of Fraser and a number of high profile CVAs, the Government have announced a number of proposed reforms to the current corporate insolvency and corporate governance frameworks which contain the most significant changes since the 2002 Enterprise Act.

The aim of the reforms is to ensure that companies are given every possible opportunity to be restructured while also ensuring that, where a company is not viable, those in charge of the company act properly and fully discharge their responsibilities. The rights of the distressed company must be adequately balanced against the rights of its creditors and other stakeholders.

The proposed reforms include the introduction of a 28 day moratorium giving viable but financially distressed companies ‘breathing space’ and allowing them to instigate restructuring measures or seek new investment. The company’s directors would remain in control with the support of a supervising Monitor, likely to be an Insolvency Practitioner.

During the period in which the moratorium is in operation, creditors will be prevented from taking action against the company. Crucially secured creditors may feel the greatest impact as, not only would they be unable to take enforcement action during this period, but in many cases, the costs incurred during the moratorium will be met by assets that would otherwise fall within the scope of their security. The proposed benefit for all creditors, however, is that early intervention is likely to enhance the prospects of meaningful recovery, leaving the company in a better financial state than would be the case without a moratorium.

Also of note for struggling companies and their suppliers, is the proposal that the termination clauses in contracts for supply of goods and services on the grounds triggered by the company’s entry into an insolvency process, will become unenforceable. This may have a significant impact on companies within certain industries and may ultimately increase the restructuring options available.

Other proposed reforms include the introduction of measures to strengthen transparency requirements around group structures and shareholder stewardship, and increased powers of insolvency practitioners in relation to the challenge of schemes designed to extract value from financially distressed companies at the expense of its creditors. Additionally the introduction of the power of the Insolvency Service to investigate directors of dissolved companies in a similar manner to the investigations into the conduct of directors of insolvent entities currently in place have also been proposed.

While the proposed reforms will undoubtedly have an effect on struggling companies and their directors, they are ultimately intended to strengthen the business environment, increase confidence and maintain the reputation of the UK as a fair, transparent and dependable place to do business.

 

HNH Group Announce Three Promotions

Posted on by Rory Moynagh

We are delighted to announce a number of promotions within HNH Group.

Rachel Foster and Rory Moynagh are being promoted to Associate Director roles, while Fiona Elwood is also joining the management team at manager level.

James Neill, HNH Director, commented:

”The promotions are very much a recognition of each of their hard work and dedication to the practice over the past number of years. We are delighted to see them each individually embrace and develop their careers at HNH. It’s incredibly important to us to see our team develop and we are all very proud of their achievements.”

“Rachel for instance is a now a licensed Insolvency Practitioner having passed the JIEB exams, widely accepted as being the hardest set of professional exams. In doing so Rachel attained the award for highest mark in the UK for a student from a smaller practice.”

“Rory has been fundamental in growing our restructuring practice (he was our first employee) to the 8 person team it is now. Rory has also expanded his technical expertise to follow market need and is now also qualified to act as a personal insolvency practitioner in the Republic of Ireland.”

“Fiona manages our personal insolvency and debt advisory team and has over 12 years experience in dealing with personal debt. She has an exceptional ability to empathise with people who are often facing one of the most stressful periods of their lives.”

“Significantly each plays a vital role in the development of HNH and we look forward to Rory, Rachel and Fiona further advancing their careers in HNH in the years ahead.”

Safeguarding Your Success

Posted on by Rory Moynagh

By Rachel Foster

There is no doubt that the effects of the liquidation of Carillion, the UK’s second largest construction company, are being felt by many other businesses in its supply chain throughout the sector in the UK and Ireland.

The current pressures felt in the industry have left many subcontractors and suppliers with short-term cash flow issues. Whilst in many cases the underlying business is profitable, working capital constraints divert management attention away from the general operations of the business and key strategic tendering opportunities.

While it may seem that the industry is facing a period of uncertainty, the changes that the sector is experiencing present the opportunity for businesses to review their existing financing arrangements and to explore other options. Those businesses who can successfully navigate the challenging market conditions will undoubtedly emerge as stronger players with leaner and more efficient cost structures.

In welcome news for the sector, the Government have announced support to businesses through the Enterprise Finance Guarantee. The British Business Bank have recently announced that an extra £100million has been made available to specifically help businesses affected by the liquidation of Carillion.

Rachel Foster HNH Group, Belfast
Rachel Foster, Senior Manager HNH Group

The overarching provisions of the scheme are that it is aimed at small and medium businesses, which may not have the security needed for conventional bank lending, and the Government guarantee 75% of the lending which is provided by over 40 accredited lenders.

The guarantees can be used to support overdraft borrowing and refinancing of existing debt.
There are also other options available to companies and individuals including:

• Agreeing a ‘Time to Pay’ arrangement with HMRC for VAT and PAYE
• Informal and formal arrangements with creditors
• Asset finance
• Traditional bank lending
• Alternative finance providers

Key to a successful financing strategy is to address the issues head on, make a focussed plan for a sustainable recovery and seek professional advice as soon as possible. Early advice and acting quickly is often integral to the implementation of an effective turnaround.

HNH Group are specialist advisors to personal and business clients of all sizes and would be happy to discuss any of the above on a confidential basis.

Rory Moynagh Completes Diploma in Personal Insolvency with Insolvency Service of Ireland

Posted on by Rory Moynagh

HNH Group Senior Manager Rory Moynagh has successfully completed the Diploma in Personal Insolvency and attained a Certificate in Personal Insolvency Practice.

This course is recognised by the Insolvency Service of Ireland in accordance with the Personal Insolvency Act 2012 and the Personal Insolvency Practitioner qualification.

As such, Rory will be able to assist debtors based in the Republic of Ireland with regards to their personal insolvency matters, including Debt Settlement Arrangements and Personal Insolvency Arrangements.

This offering is particularly relevant given the evolving landscape on the island of Ireland and the challenges presenting in a post-Brexit economy.

If you would like more details on HNH Group’s debt solutions, or to receive financial advice from a personal insolvency practitioner, please get in touch for a confidential conversation with an experienced member of our team.

HNH confirm sale of Bio-Kinetic Healthcare to Kingsbridge Private Hospital, Belfast

Posted on by Rory Moynagh

HNH Group is pleased to confirm the sale of Bio-Kinetic Healthcare Limited to Kingsbridge Private Hospital, Belfast.

Following the appointment of James Neill and Rachel Foster as Joint Administrators to Bio Kinetic Europe Limited in October 2017, Bio-Kinetic Healthcare – a fully owned subsidiary – has continued to trade under the control of the Joint Administrators offering a Bupa health screening facility in Great Victoria Street. As reported in the Irish News, we can now confirm the sale of this subsidiary to Kingsbridge Private Hospital, which is part of the 352 Healthcare Group, which will operate the clinic from its own site on the Lisburn Road, Belfast.

James Neill of HNH Group, commented ‘We are delighted to have been able to preserve what is a viable entity in its own right and to have secured the transfer of a number of roles’

Alan Cole, head of partnership centres at Bupa Health Clinics, said: “We’re really excited to have moved to this larger, world class location, and are looking forward to welcoming both existing and new clients through its doors.”

Bupa has stated that the relocation to the South Belfast medical facility could significantly increase capacity and lead to the number of patients being treated doubling over the next twelve months.

Tax Losses – Recent Changes and their Impact on Recovery

Posted on by Alison Jones

The Government has announced significant reforms relating to loss relief as part of the recent Budget, although the changes will not be implemented until April 2017. It is contended that these changes are necessary to bring the UK into line with international best practice.

Under the current system, losses carried forward can only be used by the company that incurred the loss, and not used in other companies in a group. In addition, some losses carried forward can only be set against profits from certain types of income, for example carried forward trading losses may only be used against trading profits. However, for losses incurred on or after 1 April 2017, companies will now be able to use carried forward losses against profits from other income streams or from other companies within a group.

Additionally, from 1 April 2017, the Government will restrict to 50% the amount of profit that companies can offset through losses carried forward. The restriction will only apply to profits in excess of £5m calculated on a group basis. The current rules enable companies to offset all their eligible taxable profits through losses carried forward and the Government is concerned that this can lead to a situation where a large company pays no tax in a year when it makes substantial profits. To address this, the government will restrict the amount of taxable profit that can be offset through losses carried forward.

The greater flexibility of use of losses is to be welcomed and indeed had it been implemented sooner may have helped reduce the severity of the recession in Northern Ireland. However the restriction on losses carried forward may impinge on rescue scenarios and also on the ability for distressed business to recover. The key point for consideration being that it is now vitally important that groups are efficiently structured.

Restructuring & Insolvency – Technical Update: Pension changes following the April 2015 budget (August 2015)

Posted on by Alison Jones

The position of pensions in Bankruptcy proceedings has been clear throughout the recession, pensions remain outside of the Bankruptcy estate and available for a Trustee in Bankruptcy in only one of two ways:

1. Identifying excessive pension contributions in the period preceeding Bankruptcy; or
2. The Bankrupt becomes entitled to their lump sum during their 12 month period of Bankruptcy.

As a result, unless a borrower is of pensionable age (65), and hasn’t already drawn their lump sum then pensions are often excluded from discussions with creditors.

Changes

However, recent changes to pensions legislation in April 2015 have fundamentally changed two aspects of the old regime:

1. Borrowers now have ‘flexible access’ to pensions from age 55; and
2. Pension draw down restrictions are abolished i.e. borrowers can now draw down up to 100% of their pension by way of a lump sum.

Prior to April 2015, an individual was entitled to drawdown 25% of their personal pension as a tax free lump sum upon reaching the pensionable age, with the remaining 75% to be used to provide an income – normally by way of an annuity or setting up a pension drawdown.

Following Government changes which came into effect on 06 April 2015, an individual is entitled to drawdown their pension with no restriction i.e. they can withdraw their whole pension as a lump sum, if desired, once they have reached the normal minimum pension age – currently 55 (or earlier if in ill health or if the individual has a protected retirement age).

The first 25% will still be tax free, with the remaining 75% subject to tax at the individual’s marginal income tax rate.

Impact in Insolvency

In an insolvency scenario, these changes present borrowers with access to funds which may assist in discussions with creditors outside of Bankruptcy.

If a borrower is over 55 with personal indebtedness, then the ability to drawdown all of their pension as one lump sum, or stage over a period in order to minimise their tax liability, may present the borrower with an opportunity to reach a compromise with his / her creditors. It should be noted that pensions are intended to provide an income for retirement and so it is important for borrowers to take professional advice before making any such decision.

The flexibility afforded to the borrower from such Government changes may also allow for increased application in an Individual Voluntary Arrangement (“IVA”), both as an alternative to, or as an exit mechanism out of, Bankruptcy. Drawing down an initial lump sum and staggering further drawdowns over a period, could present a borrower with an ability to provide his / her creditors with an enhanced IVA proposal. Furthermore, drawing down their entire pension pot (albeit with additional tax implications) may allow the borrower to agree a shortened IVA term with his / her creditors. It is also worth noting that any borrower not of pensionable age but in the process of proposing an IVA (and is likely to reach pensionable age during the term of the proposed IVA) may be able to offer additional funds into the Arrangement once they have reached pensionable age, in order to achieve acceptance from the body of creditors.

The recent changes also have implications in Bankruptcy and the ability of the Trustee to seek an Income Payments Order (“IPO”) against the Bankrupt’s pension entitlements for the benefit of his / her creditors. The application in a formal Bankruptcy scenario is considered in recent case law, namely Raithatha v Williamson [2012] and Horton v Henry [2014].

Contrary to the decision of Raithatha v Williamson [2012], in Horton v Henry [2014] the Judge held that a Bankrupt only becomes entitled to a payment under his pension after there are definite amounts which have become contractually payabe. An IPO attaches to a payment to which the Bankrupt is entitled. However, until the Bankrupt has exercised the option to choose between the various different ways in which pension benefits could be taken, the Bankrupt was not entitled to any payment at all against which an IPO could be made.

Therefore, unless a Bankrupt has already agreed his / her pension drawdown method, a Trustee cannot force a Bankrupt to do so, thereby preventing a possible IPO from such pension entitlements for the benefit of the Bankrupt’s creditors. If, however, a Bankrupt’s pension is already in payment, a Trustee in Bankruptcy could seek an IPO in appropriate cases.

This judgment of Horton v Henry [2014] is subject to appeal, with a hearing in the Court of Appeal now delayed until January 2016.

Whilst this position in Bankruptcy remains unclear, it is again worth stressing the considerations outside of Bankruptcy for both borrowers and creditors alike.

For those borrowers aged 55 with a pension fund, there is now a route to access substantial funds that could be provided to creditors in order to avoid potential Bankruptcy.