48. Insolvency accounting/financial transactions

How the accounting systems in relation to insolvent estates operate and the legislative basis for the accounting for fees and expenses relating to the work of the official receiver.

Introduction

48.1 Content of this chapter

This chapter contains information to assist the official receiver in understanding how the accounting systems in relation to insolvent estates operate and the legislative basis for the accounting for fees and expenses relating to the work of the official receiver.

Guidance on distributions is provided in chapter 49.

48.2 Abbreviations used in this chapter

The following legislative abbreviations may appear throughout this chapter:

Abbreviation	Legislation
EA2002	The Enterprise Act 2002
FO1986	The Insolvency Fees Order 1986
FO2004	The Insolvency Proceedings (Fees) Order 2004
FO2016	The Insolvency Proceedings (Fees) Order 2016
FAO2007	Insolvency Proceedings (Fees) (Amendment) Order 2007
IA86	The Insolvency Act 1986
IR86	The Insolvency Rules 1986
IR2016	The Insolvency (England and Wales) Rules 2016
IAR2004	The Insolvency (Amendment) Rules 2004
IAR2009	The Insolvency (Amendment) Rules 2009
IAR2010	The Insolvency (Amendment) Rules 2010
IRegs 94	The Insolvency Regulations 1994
IARegs 2004	The Insolvency (Amendment) Regulations 2004
IARegs 2009	The Insolvency (Amendment) Regulations 2009
IPO94	The Insolvent Partnerships Order 1994

48.3 Current and historical legislation governing the official receiver’s fees and expenses

The fees and expenses charged in both company winding up and bankruptcy proceedings in respect of the performance by the official receiver of their functions and duties under IA86, or the performance of functions of the Secretary of State, are laid down in:

• the Insolvency Proceedings (Fees) Order 2004 where petition was presented prior to 21 July 2016
• the Insolvency Proceedings (Fees) Order 2016 where petition was presented on or after the 21 July 2016
• the Insolvency Regulations 1994
• the Insolvency Proceedings (Monetary Limits) Order 1986
• the Insolvency Practitioners and Insolvency Services Account (Fees) Order 2009

48.4 Application of current and previous fees orders

The Insolvency Proceedings (Fees) Order 20016 (FO2016) came into force on 21 July 2016. FO2016 revoked FO2004 and all its amendments but it only applies to cases where the order was made on a petition or application submitted on or after 21 July 2016.

The FO2004 continues to apply to cases where the winding-up order or bankruptcy order were made on or after 1 April 2004, but were made on a petition presented before 21 July 2016.

The FO2004 revoked previous fees orders except in relation to ‘saved fees’ (the Secretary of State fees), which continued to be applicable to cases that were commenced under the Bankruptcy Act 1914 or the Companies Act 1985, before 29 December 1986 when the Insolvency Act 1986 came into force.

In the case of the Insolvency Fees Order 1986, the saved fees (which were the Secretary of State fees) continued to be applicable to cases that were commenced under the Insolvency Act 1986 after 29 December 1986 but in respect of which a winding-up order or bankruptcy order was made before 1 April 2004 (described as the “old cases”). All fees relating to “old cases” were abolished on 1 April 2007 following the implementation of the Insolvency Proceedings (Fees) (Amendment) Order 2007.

48.5 Legislation relating to the calculation of time and rate charges

Regulation 35 of the Insolvency Regulations 1994, dealing with the time and rate fee apply with reference to calculating the official receiver’s general remuneration when the official receiver acts as interim receiver, provisional liquidator, and where, as liquidator or trustee, the official receiver makes a distribution, realises assets on behalf of a fixed or floating chargeholder, supervises a special manager.

48.6 Debt relief orders (DROs)

DROs do not generate an “estate” and are free of charge to apply for.

All DRO applications are submitted by approved intermediaries who will confirm eligibility for the scheme.

Fees payable in relation to winding-up and bankruptcy proceedings

48.7 Summary of fees to be paid under the Insolvency Proceedings (Fees) Order 2016 (FO2016)

The fees charged under FO2016 will only be charged in cases where a petition is presented on or after the 21 July 2016. In cases where a petition is presented before this date but an order is made on or after the 21st July 2016, the fees will be charged in accordance with the fees order in place at the time of the petition being presented. For a bankruptcy or winding up order made on or after 1 April 2004 and petition presented before 21 July 2016, FO2004 applies. No new fees are to be levied in relation to cases made where the orders were made prior to 1 April 2004.

In summary, the fees charged under FO2016 are as follows:-

Name of fee	Current fee
Official Receiver’s general fee	£6,000
Trustee / Liquidator fee	15% of asset value realised by the Official Receiver
Income Payment Agreement/Order set up fee	£150
Dismissed / withdrawn petition refund fee	£50
Debtor application bankruptcy administration fee	£1,990
Creditor petition bankruptcy administration fee	£2,775
Company winding up administration fee	£5,000
Public interest (section 124A) company winding up administration fee	£7,500

48.8 Official Receiver’s administration fees

The official receiver’s administration fee is payable to the official receiver on the making of a bankruptcy or winding up order out of the chargeable receipts of the estate of the bankrupt or, as the case may be, the assets of the insolvent company. It is for the performance of the official receiver’s functions under the IA86. This includes the duty of the official receiver to investigate and report upon the affairs of companies in liquidation and bankrupts. It does not include anything done by the official receiver:

(i) in connection with the appointment of agents for the purposes of, or in connection with, the realisation of assets or;

(ii) anything done in connection with or, for the purposes of, distributing assets to creditors;

(iii) the realisation of assets on behalf of the holder of a fixed and/or floating charge; or

(iv) the supervision of a special manager

“chargeable receipts” means the sums which are paid into the Insolvency Services Account after deducting any amounts which are paid out to secured creditors or paid out in carrying on the business of the bankrupt or the company.

48.9 Official Receiver’s general fee

The official receiver’s general fee is a fixed single fee of £6,000 charged to the estate on making of bankruptcy or winding up order. It is for administration costs not recovered out of the official receiver’s administration fee. It replaced the Secretary of State’s administration fee (see B2 and W2 in FO2004, schedule 2) which operated on a sliding scale related to the value of asset realisation. The current fee structure allows creditors to know the maximum amount that will be charged for a case to be administered.

48.10 Trustee / Liquidator fee

The trustee/liquidator fee is charged in cases where the official receiver acts as trustee or liquidator and realises assets. The fee is set at a level to cover the costs of undertaking this work, currently 15% of asset value realised by the Official Receiver. In practice the fee is automatically charged to the estate when EAS post the asset funds paid into the Insolvency Service Account (ISA) in Official Receiver cases. There is no maximum amount that can be charged under this fee.

48.11 The Income payments agreement (IPA) / Income payments order (IPO) set up fee

This fee is charged in all bankruptcy cases where an IPA or IPO is set up. It is a single fixed fee of £150 and covers the specific costs incurred by the official receiver of arranging and setting up the IPA / IPO and will be collected from the first payments made by the debtor into the arrangement.

This fee will only be charged once on a case. If a debtor defaults on their payments under an IPA and the official receiver makes application to Court to enforce payments via an IPO no further fee will be payable.

48.12 The dismissed /withdrawn petition refund fee

A single fee of £50 applies to cover the costs of the official receiver’s administration work when the petition is withdrawn or dismissed by the court and the deposit paid on petition is refunded. The deposit is refunded less the amount of the fee.

48.13 Summary of fees to be paid under the Insolvency Proceedings (Fees) Order 2004 (FO2004)

Name of fee	Date of order	Amount of fee
Bankruptcy administration fee	1 April 2004 to 31 March 2007	£1,625
Bankruptcy administration fee	1 April 2007 to 5 April 2014	£1,715
Bankruptcy administration fee	6 April 2014 to 15 November 2015	£1,850
Bankruptcy administration fee	16 November 2015 to 20 July 2016	£1,990

Company winding-up administration fee	1 April 2004 to 31 March 2007	£1,950
Company winding-up administration fee	1 April 2007 to 5 April 2008	£2,090
Company winding-up administration fee	6 April 2008 to 5 April 2010	£2,160
Company winding-up administration fee	6 April 2010 to 5 April 2014	£2,235
Company winding-up administration fee	6 April 2014 to 15 November 2015	£2,400
Company winding-up administration fee	16 November 2015 to 20 July 2016	£2,520
Public interest winding up administration fee	6 April 2014 to 5 April 2016	£5,000

48.14 Secretary of State Fee

The Secretary of State fee is paid on “chargeable receipts” which means the sums paid into the Insolvency Services Account (ISA) after deducting any amounts paid into the ISA which are subsequently paid out to secured creditors in respect of their security or in carrying on the business of the company or the bankrupt. [FO2004, schedule 1]. For chargeable receipts received on or after 6 April 2009 where the insolvency order date is 1 April 2004 to 31 March 2005 (company and bankruptcy cases) the Secretary of State fee no longer applies. Existing fees charged properly should remain as charged.

48.15 Secretary of State Fee - Insolvency order date on or after 1 April 2005 but before 6 April 2010

The Secretary of State fee limited to a maximum of £80,000 is calculated as a percentage of total chargeable receipts relating to the company or bankruptcy.

For both company and bankruptcy cases where the insolvency order date is after 1 April 2005 but before 6 April 2010, the first £2,000 of chargeable receipts is not subject to the Secretary of State fee (0% applies) and the rate to be charged for chargeable receipts above this amount is 17% (up to the maximum of £80,000).

48.16 Secretary of State Fee - insolvency order date is on or after 6 April 2010 and before 16 November 2015

In cases where the insolvency order date is on or after 6 April 2010 and before 16 November 2015, the Secretary of State fee is also payable as for pre 6 April 2010 cases, but it is calculated at different rates as a percentage of total chargeable receipts, depending on the amount of those chargeable receipts, as follows:

(a) Company cases

• first £2,500 of chargeable receipts - not subject to the Secretary of State fee (0% fee applies)
• next £1,700 of chargeable receipts - 100% fee applies
• next £1,500 of chargeable receipts – 75% fee applies
• next £396,000 of chargeable receipts – 15% fee applies
• remaining amount of chargeable receipts - 1% fee applies (to a maximum total fee of £80,000)

(b) Bankruptcy cases

• first £2,000 of chargeable receipts - not subject to the Secretary of State fee (0% fee applies)
• next £1,700 of chargeable receipts - 100% fee applies
• next £1,500 of chargeable receipts - 75% fee applies
• next £396,000 of chargeable receipts – 15% fee applies
• remaining amount of chargeable receipts - 1% fee applies (to a maximum total fee of £80,000)

48.17 Secretary of State Fee - insolvency order date is on or after 16 November 2015 and presentation of bankruptcy or winding up petition is before 21 July 2016

In cases where the insolvency order date is 16 November 2015 or later and the bankruptcy or winding up petition is presented before 21 July 2016, the Secretary of State fee for the administration of the estate is also payable as for 6 April 2010 cases, but it is calculated at different rates as a percentage of total chargeable receipts, as follows:-

(a) Company cases

• first £2,500 of chargeable receipts - not subject to the Secretary of State fee (0% fee applies).
• next £1,700 of chargeable receipts - 75% fee applies.
• next £1,500 of chargeable receipts – 50% fee applies.
• next £396,000 of chargeable receipts – 15% fee applies.
• remaining amount of chargeable receipts - 1% fee applies (to a maximum total fee of £80,000)

(b) Bankruptcy cases

• first £2,000 of chargeable receipts - not subject to the Secretary of State fee (0% fee applies).
• next £1,700 of chargeable receipts - 75% fee applies.
• next £1,500 of chargeable receipts - 50% fee applies.
• next £396,000 of chargeable receipts – 15% fee applies.
• remaining amount of chargeable receipts - 1% fee applies (to a maximum total fee of £80,000)

48.18 Bankruptcy ceiling – where bankruptcy petition presented before 21 July 2016

In addition to the percentage and maximum amount restrictions on charging the Secretary of State fee, in bankruptcy estates only, no Secretary of State fee is charged on that part of the total receipts which exceeds the bankruptcy ceiling. The FO2004 describes the bankruptcy ceiling as the sum arrived at by adding together:

• the bankruptcy debts required to be paid under the Rules;
• any interest payable by virtue of section 328(4); and
• the expenses of the bankruptcy as set out in rule 6.224) other than;
• any sums spent out of money received in carrying on the business of the bankrupt; and
• fee B2 (the Secretary of State fee)

Where known creditors have not proved their debts and therefore it is not possible to pay all debts listed in the bankruptcy, there is authority [Re Ward, Ex parte Hammond and Son v The Official Receiver and the Debtor [1942] Ch 294)] to the effect that for the purposes of section 330(5), creditors means creditors who have proved in the bankruptcy. Where creditors remain unproved and the trustee is calculating the bankruptcy ceiling, the trustee is permitted to include only the proved creditors and the statutory interest paid to them as the bankruptcy debts required to be paid under the Rules.

48.19 Official receiver’s remuneration (Time and Rate Fee)

Regulation 35 of the IRegs 1994 provides that the official receiver is entitled to remuneration calculated in accordance with the applicable hourly rate for services provided by themselves in relation to:

• a distribution made by themselves when acting as liquidator or trustee to creditors (including preferential or secured creditors or both such classes of creditors);
• the realisation of assets on behalf of the holder or a fixed or floating charge or both types of those charges;
• the supervision of a special manager;
• the performance by themselves of any functions where they act as provisional liquidator; or
• the performance by themselves of any functions where they acts as an interim receiver

In other words, where the official receiver makes a distribution or performs a task for which there is no fee applicable, they should charge the time and rate fee for their remuneration. The time spent in carrying out the duty should be recorded and the fee is based on an hourly rate depending on the number of creditors and the expected time spent by each grade, using the appropriate tables as detailed in the legislation.

48.20 VAT payable on fees

Where VAT is chargeable in respect of a service for which a fee is payable under FO2016, VAT must be paid on that fee [FO2016, article 5]. The VAT must be charged regardless of whether the estate is registered for VAT. Similar provisions applied under FO2004 but no VAT is charged on the administration fee or where time and rate is used to calculate a reduced administration fee [FO2004, article 9].

Which costs are covered by the official receiver’s administration fee and which are paid by the estate?

48.21 Official receiver’s (non asset recovery) actions covered by the administration fee

Costs for work carried out by the official receiver which relates to their duties as official receiver (for example enquiries into the insolvent’s affairs to support an investigation or the compilation of the report to creditors) are covered by the administration fee, regardless of whether the official receiver does it directly themselves or if they instruct someone else to carry out the work on their behalf. It follows therefore that if there are any expenses incurred by the official receiver in undertaking the work covered by the administration fee they should not be charged to the insolvency estate but should be paid from the Vote account, where the administration fee income is, in effect, cumulatively held.

48.22 Costs incurred in realising assets

Costs incurred by the official receiver as trustee or liquidator in respect of the protection and realisation of assets are charged to the estate as disbursements.

48.23 Treatment of disbursements

The following table summarises the treatment of disbursements in official receiver’s insolvency cases post 1 April 2004:

Description of disbursement	Administration fee applicable?	Charge to estate?
Advertisement (for everything except a distribution)	Yes	No
Advertisement for distributions	No	Yes
Gazette Notice (other than provisional liquidations and dividends)	Yes	No
Gazette Notice (provisional liquidations and dividends)	No	Yes
Court fees – relating to the official receiver’s general duties	Yes	No
Court fees – relating to trustee functions	No	Yes
Land Registry search fees	Yes	No
Land Registry – Form J restrictions	Yes	No
Redirection of mail	Yes	No
Travel and subsistence (non asset related)	Yes	No
Travel and subsistence (asset related)	No	Yes
Collection of books and records	Yes	No
Credit reference searches	Yes	No
Insurance	No	Yes

48.24 Payments of advertising costs (non-Gazette)

The Insolvency Service uses agents for the issue of all statutory advertising carried out by the official receiver, for publication where newspaper advertising is required.

The agent raises invoices for the adverts placed, only after it has received proof of publication of the advertisement, which will generally be within 21 days of publication.

Payment of these invoices is dealt with by direct payment, administered centrally.

The cost of an advertisement is covered by the administration fee except for advertisements relating to distributions and where required need to be charged to the estate.

48.25 Gazette Notices post 6 April 2009

Payment of the invoices relating to Gazette notices are dealt with centrally. The exceptions to this are the payment of Gazette notices relating to provisional liquidations and dividends, which will be dealt with separately by Public Interest Unit and the Dividends Teams respectively, as the costs of these notices are not part of the administration fee.

48.26 Court fees payable by the official receiver

The administration fee covers applications that relate to the performance by the official receiver of his general duties as official receiver on the making of a bankruptcy order or a winding-up order. In the majority of applications in this category however no fee will arise as no fee is payable on a request or on an application to the court by the official receiver, when applying only in the capacity of official receiver to the case (and not as liquidator or trustee) [Civil Proceedings (Fees) Order 2008, schedule 1, paragraph 1(3)].

The administration fee will not cover applications that are associated with the realisation of assets, where the official receiver is likely to be making application as liquidator or trustee (e.g. an IPO application).

48.27 Land Registry charges

Land Registry fees are paid by the Service through a variable direct debit. The fees will be added to the variable direct debit (VDD) automatically where the Land Registry Portal is used but where a paper based application is made (for example an RX1) the option to pay through a “direct debit, under an agreement with Land Registry” should be selected. It is important that the Service’s key number is entered correctly on the form. The key number can be found in the template RX1.

As the lodging of a Form J restriction is related to the realisation of assets, the cost of obtaining the restriction is not covered by the administration fee and should therefore be charged against the estate. EAS will check the invoices from the Land Registry and arrange for them to be paid. It is very important that staff use a reference that refers to the office making the application and the particular case to which the application relates in the format “BKT Number-Office”. If the Form being used forms part of a joint application the reference should be prefixed with the letters “JNT”.

48.28 Travel and subsistence

A travel and subsistence claim relating to the protection of assets (a trading inspection) is not payable from the administration fee and should be paid by the estate. If, however, the inspection was also for the purpose of collecting or protecting accounting records in relation to a possible investigation, it may be necessary to apportion the cost between the estate account and the Vote account.

A claim entirely in connection with enforcement to cooperate or further investigation work would be covered by the administration fee and should be paid from the Vote account.

48.29 Apportioning costs where agents recover assets and accounting records on behalf of the official receiver

Where an agent is employed by the official receiver to recover assets, they will usually account to the official receiver for the proceeds of the assets they have recovered net of their fees and expenses, as a direct cost to the estate account.

Where the official receiver has instructed their agent to recover accounting books and records, the cost of this activity is covered under the official receiver’s administration fee.

Where the agent has been instructed to recover both assets and records on behalf of the official receiver, they should be asked to identify in their invoice which costs relate to which activity, to enable the official receiver to apportion the expenses accordingly.

48.30 Public Interest Unit (PIU) cases

Where an order appointing a provisional liquidator/interim receiver has been made, any disbursements up to the date of the winding-up order or bankruptcy order are charged to the estate. The decision on whether further disbursements on a PIU case should be charged to the estate will be determined on exactly the same basis as any other insolvency case which the official receiver administers – as set out in paragraphs above.

Fees on recall, rescission, stay or annulment of insolvency proceedings

48.31 Recovery of fees on rescission of winding-up order or annulment of bankruptcy order

The official receiver should always ensure that the annulment order makes provision for the official receiver’s costs.

An annulment on the grounds of payment in full requires that the bankruptcy debts and expenses are paid in full. The expenses include the fees payable under FO2016 [rule 10.149]. Consequently, where an annulment is on the grounds that the debts are paid in full or following the agreement of an IVA, both fees should be paid in full before the official receiver can agree to the annulment.

If the annulment is on the grounds that the order ought not to have been made or the winding-up order is rescinded the official receiver might only recover fees from funds available in the estate account. In the majority of cases the official receiver will simply ask the court confirm that the petition deposit be retained and applied to the part payment of the official receiver’s administration fee [HMRC v Direct Affinity & Ors [2019] EWHC 3063(Ch)]. If there are any additional disbursements (costs) charged to the estate which are not covered by the administration fee (see paragraph 48.8), for example insurance costs, the official receiver should ask for these to be included in the costs order.

Where the official receiver has made any realisations the court might be asked to confirm the official receiver might retain all funds received, including the petition deposit, up to the maximum of the administration fee and general fee. The company / bankrupt can seek recovery of any sums lost to them through the realisation of assets from the petitioning creditor by way of their own application for costs. If a surplus remains and funds are to be returned to the company / debtor the liquidator / trustee fee should be rebated on the amount to be refunded. If the application is made some time after the bankruptcy order, and the actual costs of the official receiver, on a time and rate basis, exceed the deposit (and there are no realisations) the official receiver should request a costs order is made above the amount of the retained deposit. Where the court determines that the petitioner is not liable for the costs then the official receiver should seek an order that the applicant is liable for the costs to the extent set out above.

48.32 Seeking official receiver’s costs where annulment occurs without notice

Where a (former) bankrupt has failed to follow proper procedure in making an annulment application, for example, by not advising the official receiver of the hearing thereby denying the official receiver the opportunity to seek their costs in the proceedings, the official receiver may seek a review of the annulment order. Unless the petition has been adjourned and not dismissed, following annulment the bankruptcy proceedings are in effect “closed” as far as the court is concerned, which means it will not be possible to make an application for a costs order, unless an application is made to court to review the annulment order.

The official receiver should also consider the following options to recover costs and fees in the proceedings:

• using the petition deposit to discharge the outstanding fees, to the extent that assets recovered are not sufficient
• where funds are held from the realisation of assets these could be retained to recover the official receiver’s costs
• writing to the (former) bankrupt to seek payment of costs, informing them that if agreement cannot be reached, the official receiver will seek a review of the annulment and this could result in the individual being declared bankrupt again

Expenses in insolvency proceedings

48.33 Payment of expenses or costs from the insolvent estate assets

In liquidation proceedings any fees, costs, charges and other expenses incurred in the course of the liquidation are to be regarded as expenses of the liquidation and are payable out of the assets of the company (including property comprised in or subject to a floating charge), prior to any distribution to creditors or contributories. In bankruptcy proceedings the expenses of the bankruptcy are payable out of the assets of the bankrupt’s estate prior to any distribution to creditors.

48.34 Order of priority of payment

The priority for payment of costs and expenses must be followed in order, as set out in the Insolvency (England and Wales) Rules 2016 at rule 7.108 (company liquidations) and rule 10.149 (bankruptcies). rule 7.108 is subject to the provisions of rules 7.111 to 7.116, which deal with litigation expenses and property subject to a floating charge.

48.35 Expenses where there is a floating charge account in a liquidation case.

Section 176ZA applies to all compulsory liquidation cases where the winding-up order is made on or after 6 April 2008, except where the winding-up order is made following a resolution for a voluntary winding up, passed by that company before the commencement date (6 April 2008).

The effect of this section is to allow unpaid general liquidation expenses to be recovered from the floating charge account as well as the general estate account.

48.36 Expenses of previous voluntary liquidation

If a creditors’ or members’ voluntary winding up precedes a winding up by the court, the remuneration of the voluntary liquidator and the costs and expenses of the voluntary liquidation that may be allowed by the court, rank in priority with those of the provisional liquidator, official receiver or liquidator referred to in the Insolvency (England and Wales) Rules 2016 rules 7.108(4)(a) and 7.109 refers.

48.37 Expenses of provisional liquidator

Where a provisional liquidator causes a company to continue trading until the business of the company is sold as a going concern, and has collected VAT and deducted PAYE income tax and national insurance contributions from staff wages, these expenses are given superior priority [Grey Marlin Limited [1999] All ER (D)]. In the relevant precedent case case, the High Court also ordered that other expenses incurred by the provisional liquidator in preserving, realising or getting in any of the assets should be paid in priority to the expenses of the official receiver or liquidator in undertaking the same type of work, but after the payment of the tax liabilities.

48.38 Expenses incurred in an existing voluntary arrangement

If a winding-up order is made when there is at the date of the presentation of the petition a company voluntary arrangement (CVA) in force, the expenses properly incurred as expenses of the administration of the CVA should be paid in priority to any expenses of the liquidation.

In the same way, if a bankruptcy order is made on a debtor’s petition, and at the time the petition is presented the debtor is subject to an individual voluntary arrangement (IVA) which is in force, any expenses properly incurred as expenses of the administration of the IVA become a first charge on the bankrupt’s estate.

48.39 Payment of administrator’s remuneration and expenses upon vacating office

Where a person ceases to be the administrator of a company, which could be as a result of resignation, death, removal from office or cessation of appointment (for example where a winding-up order is made), the former administrator holds a first charge in respect of their remuneration and expenses incurred during their appointment, on any assets over which they had custody or control immediately before the cessation of the administration [Insolvency Act 1986, schedule B1, paragraph 99(3)(a)]. This also applies to any assets held by the administrator which are subject to a floating charge [Insolvency Act 1986, schedule B1, paragraph 99(3)(b), Insolvency Act 1986, schedule B1, paragraph 70].

In practice this means the former administrator is likely to transfer to the liquidator any assets they are holding net of their remuneration and expenses. For details of the priority of payment of administration expenses see rule 3.51.

48.40 Administrator’s charge over assets held immediately prior to cessation of appointment

Any sum payable in respect of a debt or liability arising out of a contract entered into by the former administrator is also a first charge on assets over which they had custody immediately prior to the cessation of their appointment [Insolvency Act 1986, schedule B1, paragraph 99(4)]. This includes any liability arising under a contract of employment adopted by the former administrator (or a predecessor) [Insolvency Act 1986, schedule B1, paragraph 99(5) ]. The charge on the assets in respect of these debts arising out of contracts entered into, takes priority over any charge in respect of the former administrator’s remuneration and expenses.

48.41 Assets received by liquidator following prior administration

Where an administrator was in office prior to the liquidation of the company, any remuneration and expenses owing to the administrator are charged on and payable out of assets of which the administrator had custody or control immediately before cessation of appointment. However, there may be instances of funds refundable to the company prior to cessation but paid after cessation that do not fall within this as they cannot be said to have been within the custody or control of the administrator. An example of this would be a refund of business rates due prior to cessation but paid after cessation.

48.42 Payment of expenses of winding up proceedings

In the event of assets being insufficient to satisfy the liabilities, the court may make an order as to the payment out of the assets of the expenses incurred in the winding up, in such order of priority as it thinks just [Section 156]. In a normal case, the priorities laid down by IR2016 rules 7.108 and 7.109 will apply. The court will only in exceptional circumstances exercise its jurisdiction under IA86 section 156 to confer on the liquidator’s remuneration, or any part of it, priority over liquidation expenses which would normally rank before it [Re Linda Marie (In liquidation) (1988) 4 B.C.C. 463].

48.43 Payment of former liquidator or trustee’s costs (official receiver acting ex-officio)

Where an insolvency practitioner vacates office following appointment as liquidator or trustee, they may have unbilled costs still to be charged to the estate. If the official receiver, acting in an ex-officio capacity, realises further assets, the former liquidator or trustee’s unbilled costs can be paid from these further realisations following the usual order of priority [rules 7.108, 10.149].

Petition deposit and costs (excluding partnerships)

48.44 Petition deposit

A winding-up or bankruptcy petition cannot be presented to court unless a deposit has been paid to the court and receipt produced or the Secretary of State has given written notice to the court, that the petitioner has made suitable alternative arrangements to pay the deposit [rules 7.7, 10.12 and 10.39]. An exception to this requirement to pay a deposit is where the court, on hearing an application for an administration order in respect of a company, decides instead to treat the application as a winding-up petition and make any order which the court could normally make under section 125 of the IA86 (powers of court on hearing of petition) [Schedule B1, paragraph 13(1)(e)]. Courts must transmit the deposit paid, with the details of the petition, to The Insolvency Service, Estate Accounts and Scanning (EAS) [Insolvency Proceedings (Fees) Order, article 6(3)].

48.45 Deposit and Adjudicator’s administration fee for bankruptcy application

Bankruptcy debtor petitions were removed from the courts and replaced by the new online bankruptcy application service from April 2016. The digital applications go to the Adjudicator’s Office who consider and make the decision for bankruptcy. The debtor must pay a total sum of £680 in full before their bankruptcy application can be submitted. This comprises £130 for the Adjudicator’s administration fee, for the performance of the Adjudicator functions, and £550 deposit as security for the payment of the Official Receiver’s fee.

After a bankruptcy application is submitted the Adjudicator’s fee (£130) is not returned regardless of the outcome decision. The deposit amount will be repaid to the debtor where the Adjudicator has refused to make a bankruptcy order, 14 days have elapsed since notice of refusal and no request made to review the decision.

48.46 Amount of petition deposits

The Insolvency Proceedings (Fees) Order 2016, article 4, makes provision for the payment of deposits as security for the payment of fees in insolvency proceedings.

Article 2 provides that the appropriate deposits to pay are as follows (with effect from 21 July 2016):

(a) in relation to a winding-up petition, other than a petition presented under section 124A (petition on grounds of public interest), the sum of £1,600;

(b) in relation to making a bankruptcy application by the debtor , the sum of £550;

(c) in relation to all other cases (including creditor petition bankruptcy cases) [ Section 264(1)], the sum of £990

48.47 Deposit repayment (including following annulment or rescission)

The deposit paid by the petitioner on presentation of a winding-up or bankruptcy petition, or by the debtor on making a bankruptcy application, is security for the payment of the Official Receiver’s administration fee. Where an order is made (including any case where the order is made and subsequently annulled, rescinded or recalled), the deposit will be returned to the person who paid it, save to the extent that the assets comprised in the estate of the bankrupt, or the assets of the company, are insufficient to discharge the Official Receiver’s fee, unless the court orders otherwise. This means that if there were no or insufficient assets realised but for example the Official Receiver’s administration fee was charged in a bankruptcy case, the deposit can be retained to pay part of that fee.

48.48 Repayment of deposit where petition dismissed or withdrawn

Where a petition is dismissed or withdrawn before an insolvency order is made, generally the deposit will be repaid to the person who paid it [Insolvency Proceedings (Fees) Order, article 6(4)], less an administration fee of £50.

48.49 Deposit amount changed after petition presented

A petition can only be filed on the production of a receipt for the deposit payable. The petition deposit will be the appropriate amount due as at the date that it is paid to the court. If the amount required for the deposit has changed before the making of the insolvency order (as a result of updated fees amendment legislation coming in to force in the interim period), the deposit paid is still valid and the official receiver will continue the administration of the case using the original deposit as security for payment of the fees.

Where in a bankruptcy case there is an annulment hearing and the petition is re-listed for hearing, it is open to the official receiver to seek an order of the court that, where the deposit amount increased after the original petition was filed, the difference required to reach the increased deposit amount is paid, as a condition of the petition being re-listed. Without such a court order the official receiver will have no grounds to recoup the difference from the petitioner.

48.50 Frequent petitioner accounts

The Insolvency (England and Wales) Rules 2016 allow creditors to make alternative arrangements for the payment of deposits. The amendment provides that a deposit must be paid to the court before a petition can be filed unless the Secretary of State has given written notice to the court that the petitioner has made suitable alternative arrangements to pay the deposit [rules 7.7(2) and 10.12(2)]. Petitioners may set up an account with EAS which will fund only the deposits on any petitions presented which result in orders being made. This means that those petitioners with approved accounts are not required to pay a deposit to the court upon filing a petition. This provision benefits those creditors who issue large numbers of petitions that are subsequently dismissed/withdrawn, as funds are only taken when the order is made. EAS will notify the HM Courts and Tribunals Service with the particulars of creditors who open a frequent petitioner account with The Service.

48.51 Dealing with the deposit in frequent petitioner cases

In practice, when a frequent petitioner presents a petition, they will not have to pay the deposit to the court. If the petition is subsequently dismissed or withdrawn, the dismissed / withdrawn petition administration fee of £50, is charged and this amount is paid/recovered from HMRC’s Frequent Petitioner Account funds. This is done automatically when the date of dismissal or withdrawal is updated into the case management system.

If the order is made, the financial system will automatically post the amount of deposit onto the case’s General Fund and equally, debit the frequent petitioner’s account which holds the funds received in advance for the expected volume of orders. Any subsequent refund of deposit, following an annulment or where there is a credit balance etc., will be processed as per current practice by a cheque payment made to the petitioner. Twice monthly the frequent petitioner is invoiced to top-up their account to a pre-agreed limit. The account is carefully monitored by EAS to ensure that they do not become overdrawn.

EAS have responsibility for managing the Frequent Petitioner account and are also responsible for giving notice to the HM Courts and Tribunals Service when frequent petitioner status is granted or revoked.

48.52 Deposit to be returned where petitioner’s costs forfeited

Where the liquidator or trustee proceeds with a distribution to creditors, should sufficient funds exist following payment of expenses ranked as a higher priority [rules 7.108 and 10.149], they are required to repay the costs of the petitioner and of any person appearing on the petition whose costs are allowed by the court. Where the office-holder requires the petitioning creditor to decide their costs by detailed assessment [rule 12.42] and the petitioner fails to commence proceedings to decide these costs within 3 months of the requirement, they forfeit their claim to those [rule 12.43].

The instruction requiring the repayment to the petitioner of any amount repayable from the deposit lodged as security for the payment of fees appears higher in the order of priority of expenses [rules 7.108 and 10.149] than payment of the petitioner’s costs. This means that irrespective of the forfeiture of the petitioner’s costs, the petition deposit should be repaid to the petitioner to the extent that it is not required to pay fees where the insolvent’s assets are insufficient.

48.53 Detailed Assessment of costs

As a general guide, a bill for petition costs up to £2,200 in companies and £1,700 in bankruptcies can be approved by the official receiver (or their deputy) for immediate payment. Depending on the circumstances of the case it may be that a higher amount is justified where, for example, service of the petition has been resisted. Where the costs are considered excessive, the petitioning creditor’s solicitor should be informed and asked to reduce their bill to an acceptable level or submit the bill for assessment and provide a costs certificate for payment. Detailed assessment should only be requested where there are sufficient funds to enable the petition costs to be paid in full or where it is known that funds will become available shortly.

Partnership fees, costs and expenses

48.54 Introduction

This part deals with the administration of partnership cases, including fees, costs, expenses and assets. The provisions in this regard are provided under the IA86 with modifications under the Insolvent Partnerships Order 1994 (IPO94).

48.55 Winding up procedures for partnership businesses

The IPO94 provides five routes via which a partnership business may be wound up:

(a) “Ordinary” partnerships:

• winding up as an unregistered company without any petitions against the members or former members. The petitioner is any person other than a member
• winding up as an unregistered company with petitions against one or more of the members or former members. Petitioner is either a creditor, liquidator or temporary administrator
• winding up as an unregistered company without any petitions against the members where the petitioner is a member of the partnership
• winding up as an unregistered company with petitions against all the members. Petitioner is a member

(b) Article 11 partnerships:

• joint bankruptcy petition by the members without the winding up of the partnership as an unregistered company; although the order gives the trustee of the bankruptcy estates authority to wind up the affairs of the partnership

See Annex B to this chapter for details of the different accounting conventions for the deposit and administration fee applied to “Ordinary” and “Article 11” partnerships.

48.56 Deposit received in partnership winding up proceedings (article 7 or 9 of the IPO94)

If a deposit is received for the winding up of a partnership under articles 7 or 9 of the Insolvent Partnerships Order 1994 (IPO94) (where there is no concurrent petition against any member), the case should be treated as if it were an unregistered company and the deposit credited to the partnership’s estate account.

48.57 Deposit received in partnership winding up proceedings (articles 8 or 10 of the IPO94)

If a deposit is received for the winding up of a partnership (as an unregistered company) and also concurrent petitions are presented against one or more members of the partnership (under Article 8 or 10 of the IPO94), one deposit is paid and credited to the partnership estate account. Proof of payment of this deposit is sufficient to enable a petition to be presented against any member, but the deposit is only credited to the partnership estate account. [Insolvent Partnerships Order 1994, article 13]

48.58 Petitioner’s costs in abortive partnership winding up proceedings not claimable from bankruptcy estate

Where a petition is presented against a partnership business and an individual partner under Article 8 of the IPO94, and the winding-up petition against the partnership is subsequently dismissed, the petitioner cannot claim expenses related to the winding up of the partnership from the partner’s bankruptcy estate. If the winding-up petition is withdrawn (i.e. as a consequence of the petition debt being paid) or dismissed, it is open to the petitioning creditor to seek an order for costs in those proceedings. Without an order of costs in the winding-up proceedings, the petitioning creditor must bear their own costs.

48.59 Joint bankruptcy petition under Article 11 of the IPO94

If a joint bankruptcy petition is presented under Article 11 (Insolvency proceedings not involving the winding up of the insolvent partnership as an unregistered company where individual members present joint bankruptcy petition), then only one deposit will be received. In such cases only one joint bankruptcy order is drawn up showing each description separately and appointing the trustee of the bankrupts’ estates to be trustee of the partnership estate and to wind up the affairs of the partnership and administer the partnership property. An estate account should be opened for the partnership and separate estate accounts for each partner. The petition deposit should only be apportioned equally between the separate estates and not the joint estate.

48.60 Partnership administration fees

(a) Joint bankruptcy petition (Article 11)

Where the members of an insolvent partnership jointly present a petition to the court for bankruptcy orders to be made against each of them in their capacity as a member of the partnership, and the winding up of the partnership business and administration of its property without the partnership being wound up as an unregistered company, the bankruptcy provisions of the IA86 Part IX (except section 287) and Parts X to XIX insofar as they relate to orders where a bankruptcy application is made by a debtor apply. Each individual partner’s estate will attract an administration fee but no administration fee is charged against the joint estate.

(b) Winding-up order against partnership plus concurrent insolvency orders against member(s)

Where a winding-up order is made against a partnership and there are concurrent insolvency orders against some, or all, members, the partnership itself is treated as an unregistered company and the official receiver’s administration fee will be charged to the partnership estate. As bankruptcy orders (or winding-up order) will be made against the individual members an administration fee is charged in each individual member’s estate. In addition to the partnership estate, there will be a separate estate for each member against whom an insolvency order is made [Insolvent Partnerships Order 1994, article 8, Insolvent Partnerships Order 1994, article 10].

48.61 Consolidation of partnerships – dealing with administration fee

See paragraph 52.155 for details of the order to seek where all individual partners are subject to bankruptcy orders made separately either on their own applications or on the petition of creditors.

Even if the orders are consolidated (see paragraph 52.123) each of the estates against which an insolvency order has been made should have an administration fee charged to it (but not the partnership estate as this does not have an insolvency order made against it).

48.62 Official Receiver’s General Fee in partnership estates

The Official Receiver’s general fee is charged in full to each partnership estate which attracts an administration fee.

	‘Ordinary’ Partnerships	‘Article 11’ Partnerships
Features	Winding -up order (WUO) against partnership with or without Bankruptcy order (BO) against any individual partner or WUO against any corporate partner. WUO against each corporate (partner). All separate court numbers.	Joint bankruptcy order against every partner, trustee of partners’ estates acts as trustee of partnership. No WUO against partnership. All under same Court number. (A ‘bankruptcy’ joint estate account will also be opened.)
Deposit	One deposit applied to the partnership estate	One deposit apportioned between each partner’s (separate) estate - not to the joint estate.
Administration and General Fee	Charged to any separate estate and to joint estate	Charged to each partner’s estate - not to the joint estate

48.63 Priority of expenses

Sections 175 and 328 as modified by the Insolvent Partnerships Order 1994 Schedule 4(23) apply in a case where Article 8 or Article 10 of IPO94 apply, as regards priority of expenses incurred by a responsible insolvency practitioner of an insolvent partnership (which includes the official receiver), and of any insolvent member of that partnership against whom an insolvency order has been made.

Section 328 as modified by the Insolvent Partnerships Order 1994 Schedule 7(21), applies in a case where an Article 11 order has been made.

The priority of expenses is as follows:

i. Firstly the assets of the partnership estate are applied in payment of the partnership estate expenses.

ii. Also the assets of the separate estate of each insolvent member are first applied to the payment of the separate expenses relating to that member’s estate.

iii. Where insufficient funds are available in the joint estate to pay the joint expenses in full, any unpaid balance is apportioned equally between the separate estates of insolvent members (against whom insolvency orders have been made) and shall form part of the expenses to be paid out of those estates.

iv. If any separate estate of an insolvent member has insufficient funds to pay in full the separate expenses relating to that estate, then the unpaid balance shall form part of the expenses to be paid out of the joint estate.

v. If once an unpaid balance has either been apportioned between the separate estates or transferred to the joint estate, as the case may be, the balance remaining unpaid shall be apportioned equally between the other estates.

vi. If there are still insufficient funds to pay in full, then the unpaid balance will be apportioned equally between the other estates. After this, where one or more estate is carrying a debit balance, the total of the unpaid expenses to be paid out of those estates shall continue to be apportioned equally between the other estates until the expenses are paid in full or there are no funds available to meet the unpaid expenses, in which case the unpaid balance is apportioned equally between all estates.

48.64 Payment of expenses from any estate, with the leave of the court or sanction of the creditors’ committee

Without prejudice to the guidance above, the responsible insolvency practitioner, with the sanction of the creditors’ committee or with the leave of court, may;

a. pay out of the joint estate as part of the expenses to be paid out of that estate any expenses incurred for any separate estate of an insolvent member; or

b. pay out of any separate estate of an insolvent member any part of the expenses incurred for the joint estate which affects the separate estate [Insolvent Partnerships Order 1994, schedule 4, paragraph 23]

Debit balances

48.65 Incurring a debit balance

Where the estate is in a debit position, an official receiver must seek the permission of the Senior Official Receiver’s Office before they make a payment in excess of £2,500. Although the permission of Senior Official Receiver’s Office is not required to make a payment from the estate of £2,500 or less, permission should still be sought where it is expected that the total amount of payments will be over £2,500. An example would be a payment for legal advice where further payments might be required to fund connected legal action.

If the estate is in a credit position, an official receiver has full discretion to utilise the credit funds, as necessary, provided that there is a demonstrable benefit to the estate in doing so and all relevant decisions and facts are recorded on the case management system.

Guidance on seeking and obtaining the approval of the Senior Official Receiver can be found in chapter 1.

48.66 Debit balance write offs and subsequent asset realisation

The principle of the legislative framework set out by the Insolvency Act 1986 and the Enterprise Act 2002 is that the costs of the liquidation or bankruptcy must be met from the insolvent estate. The order of payment of costs from an insolvent’s estate is set out in rule 7.108 (companies) and rule 10.149 (bankruptcy). There is no provision in the legislation to write off the expenses of the liquidation or bankruptcy. If unsecured assets are realised they must be applied by reference to the priority of payment regardless of the date of realisation, and the case will be re-opened should assets become realisable after the case has been closed for administration purposes. The writing off of debts is an administrative policy/process. It is carried out for accounting and administrative purposes only.

Fees and expenses in IVAs

48.67 Expenses following default in individual voluntary arrangement

In a bankruptcy case, if a bankruptcy order is made on a petition presented by the supervisor as a result of the bankrupt’s failure to fulfil their obligations under a voluntary arrangement [section 264(1)(c)], the expenses properly incurred as expenses of the administration of the voluntary arrangement become a first charge on the bankrupt’s estate [section 276(2)].

Investment of funds by liquidator and trustee

48.68 Payments into the Insolvency Services Account (ISA)

The Insolvency Regulations 1994 (as amended) require the liquidator of a company wound up by the court or trustee in bankruptcy to pay all money received by themselves in the course of carrying out their functions as such, without any deduction, into the Insolvency Services Account (ISA) kept by the Secretary of State. The money is required to be paid into the account to the credit of the company or bankrupt once every 14 days or forthwith if £5,000 or more has been received [Insolvency Regulations 1994, regulations 5(1) and 20(1), section 403].

48.69 Cash received locally

Where the official receiver receives cash, e.g. recovered on inspection, they should pay the monies into the ISA by banking at a local branch using a paying in book issued by Estate Account Services (EAS).

All other monies remitted to the official receiver should be forwarded to EAS for processing and banking. Details of general receipts and remittances should be emailed to EAS prior to dispatch.

48.70 Dealing with receipts where a liquidator or trustee continues a business

An exception to the requirement to pay all monies into the ISA is where the liquidator or trustee is exercising their power to carry on the business of the company or bankrupt and the Secretary of State has authorised operation of a local bank account [Insolvency Regulations 1994, regulation 21(1)]. In this circumstance the official receiver as liquidator or trustee may apply to the Secretary of State for authorisation to open a local bank account. The Secretary of State may then authorise the official receiver to make payments into and out of a specified bank, subject to a limit, instead of the ISA [Insolvency Regulations 1994, regulations 6 and 21]. Authorisation will only be given where Senior Official Receiver’s Office acting on behalf of the Secretary of State is satisfied that an administrative advantage will be gained from having such an account. The liquidator or trustee shall pay without deduction any surplus over any limit imposed by the Secretary of State into the ISA. The official receiver should exercise extreme care to ensure that only money belonging to the estate is paid into the ISA. Third party monies should not be paid in but held in a separate account.

48.71 Payment of interest to estate

Whenever there are monies standing to the credit of the company or the estate of the bankrupt in the ISA, the company or bankruptcy estate shall be entitled to interest on those monies. The interest rate applied to estate balances in the Insolvency Service Account is set to match the Bank of England base interest rate. The Secretary of State may, by notice published in the London Gazette, vary the rate of interest, and such variation shall have effect from the day after the date of publication of the notice in the London Gazette [Insolvency Regulations 1994, regulations 9(6B) and 23A(6B)].

48.72 Cessation of interest accrual

Interest shall cease to accrue when the liquidator or trustee gives written notice to the Secretary of State that in their opinion it is expedient or necessary, in order to facilitate the conclusion of the winding up or bankruptcy, that the interest should cease to accrue. Interest shall start to accrue again where the liquidator or trustee gives a further notice in writing to the Secretary of State requesting that interest should start to accrue again [Insolvency Regulations 1994, regulations 9(6A) and 23A(6A)].

48.73 Automatic calculation and payment of interest and tax

All estate funds in the ISA are interest bearing by default unless EAS are instructed otherwise by the liquidator or trustee. Interest and tax are automatically calculated and posted to all financially open estate funds bi-annually in April and October.

Liquidators and trustees may instruct EAS to cease and capitalise interest for an individual case, e.g. Insolvency Practitioner’s preparation to bring case to a close and report final receipts and payments with final interest. When actioned by EAS the case management system will calculate and post the final interest overnight to the case.

48.74 Payments into the ISA by liquidator following company dissolution

Following the amendment of the Insolvency Regulations 1994 on 6 April 2008, monies which are still held by the former liquidator, administrator or administrative receiver of a dissolved company and which are either unclaimed dividends due to creditors (where for example creditors cannot be traced), and/or sums held by the company in trust in respect of dividends or other sums due to any person as a member or former member of the company [Insolvency Regulations 1994, regulation 18(1)], may in the case of a voluntary winding up, administration or administrative receiver be paid into the ISA. In the case of a winding up by the court these monies must be paid into the ISA [Insolvency Regulations 1994, regulation 18(2)].

(Former) liquidators of companies in members’ voluntary liquidations are still likely, upon the dissolution of those companies, to pay the monies held as unclaimed dividends or due to the members into the ISA, unless, for example, the monies were to be held by a trust company or corporation which had had some involvement in the processing of the distribution of the monies.