SAM106120 - Records: bankruptcy: voluntary arrangements

Voluntary Arrangements Service (VAS) at Enforcement and Insolvency Service (Worthing) will deal with notifications that either an application for an interim order has been made, or that a creditors meeting has been arranged. Any necessary advice will be given to the Debt Management office, as will a copy of the approved proposals.

Voluntary arrangements are not available under Scottish law.

In relation to insolvency terminating any agency contract, the law of agency in Scotland has the same effect as the law in England and Wales, i.e. the transfer of assets from an individual to their trustee, in a bankruptcy, causes the agency to terminate. A condition of a Protected Trust Deed (PTD) (section 167(1) Bankruptcy (Scotland) Act 2016) is that all the debtor's estate is conveyed to the trustee. 

Detailed guidance is provided in the Insolvency Manual, see INS10000 onwards.

The procedural principles of voluntary arrangement cases are the same as for bankruptcy cases. For example

  • Notifications received direct in the office with responsibility for Processing work or Debt Management office are to be referred to the Enforcement & Insolvency Service (EIS). See INS10235
  • The taxpayer / debtor may continue to receive income and / or gains that are liable to Self Assessment after the date of the interim order. Separate records are required to deal with liability to the date of the interim order, and subsequent to the date of the interim order

There are five differences

  • 1)  If an office with responsibility for Processing work (or Debt Management office) in England, Wales or Scotland learns of the interim order from a source other than from EIS see INS3309
  • 2)  In Voluntary arrangements it is considered essential that the debtor
    • Files any outstanding returns at the date of filing the proposals
    • Complies with all future obligations for filing returns and making payments of liability outside the Voluntary Arrangement by the statutory dates
  • 3)  Where the Supervisor disposes of an asset and agrees to meet all or part of any resultant Capital Gain, the tax due on the Capital Gain nevertheless remains chargeable on (and payable by) the debtor. The debtor’s SA return for the relevant year should therefore include the Capital Gain
  • 4)  In Voluntary Arrangement (VA) cases statements should continue to be issued to the taxpayer not the supervisor of the VA. You should ensure you do not set up Supervisor in capacity for VA cases
  • 5)  In voluntary arrangement cases, the individual retains control of their business and we should continue to communicate directly with the customer, or their agent (if applicable). Any agents details held on the record should not be removed (as is done with bankruptcy cases) unless you receive information that the agent is no longer acting

Note: SA processing teams should not set up any Post VA records. These records will be set up by East Kilbride PT Ops Bankruptcy Team. If the information recorded on SA Notes by East Kilbride PT Ops Bankruptcy Team or VAS is insufficient to enable you to resolve a post VA issue, contact the respective team via the following mailbox.

VAS

VAS, id (DM)

East Kilbride PT Ops Bankruptcy Team

DL-EK-Bankruptcy Queries

 <h2>Failed Voluntary Arrangements</h2><p>If a customer enters into a VA which fails, and the customer is made bankrupt within the same year, the VA record should be changed to show the BY details, and the VA details removed. The post VA record should then be updated to show that it is now the post BY record.</p><p>However, if the customer enters into a VA which fails and the customer is made bankrupt in a later year, the VA record remains unchanged. The post VA record should be changed to show the BY details, and a new post BY record created (if applicable).</p>