HM Revenue & Customs (HMRC) now require statutory interest on corporation tax (CT) where it is paid after the normal due date, which has significant implications for current and future Members’ Voluntary Liquidations (MVLs).

HMRC require the payment of statutory interest at 8% from the commencement of a liquidation on any CT that falls due for payment after that date, even where the normal due date for payment is not until after the commencement of liquidation and payment is made before the normal due date.

HMRC’s understanding of the correct treatment of statutory interest derives from a court’s decision in Lehman Brothers International (Europe): Lomas v Burlington Loan Management Ltd, which strictly speaking should only apply to Administration cases. However, HMRC consider that it is equally applicable in a liquidation.

That case signalled that statutory interest was due on both future debts and contingent debts, and since CT payable on a normal due date after the commencement of a liquidation is a future debt, statutory interest falls due.

R3, the Association of Business Recovery Professionals, are aware of this change and are in contact with HMRC about it, but for the time-being we should assume that statutory interest will be payable. We further assume that this will also apply to any other taxes that fall due for payment after the commencement of liquidation, such as PAYE, National Insurance and VAT.

The important point to note is that this will not impact upon the decision to enter into a MVL, which will normally have significant tax benefits, and ensures that the affairs of the Company are properly concluded, but consideration should be given if possible to settling all tax prior to the commencement of the liquidation, to ensure that statutory interest does not then apply.

Should you wish to discuss this issue further or MVLs more generally, please contact a member of the Business Recovery and Insolvency team, who will be pleased to assist.


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