Register and maintain subcontractor: the registration process: applicants in voluntary arrangements
|CISR42600||Action guide contents|
A voluntary arrangement enables a debtor to come to a formal agreement with creditors regarding payment of their debts. Proposals are prepared by an insolvency practitioner called the nominee or, if the individual is already bankrupt, by the trustee in bankruptcy.
The proposals are placed before a meeting of creditors and, if approved, with or without modifications, are binding on all creditors who are notified of the proposals. Once approved the voluntary arrangement is then overseen by an insolvency practitioner called the supervisor.
A voluntary arrangement can be of varying length, but usually lasts between three and five years. The creditors agree with the debtor what ‘dividend’ is expected out of the voluntary arrangement. This dividend is expressed as being pence in the pound and represents the amount the creditor can expect to receive from the debtor for every £1 of debt the debtor owes.
Example; A dividend of 21p means that if the debtor owed £1000, his creditor(s) in total could expect to receive £210 towards the total debt owed
Once the voluntary arrangement has come to an end, this dividend is taken as satisfying in full all of the debts that the debtor owes to their creditors.
Continuation of business
In contrast to bankruptcy cases, which commonly lead to the cessation of business, voluntary arrangements are often entered into to preserve the business as a going concern. Where a participating taxpayer continues to trade, cancellation of gross payment status is not appropriate. However, the business would have had to continue to pay all its tax liabilities on time to ensure it met the compliance obligations.
An area where voluntary arrangements differ from insolvency situations is the procedure where the participating taxpayer is a contractor or employer. In practice, the supervisor normally allows the taxpayer to continue operating the business, including the everyday operation of any PAYE/CIS scheme in being. Unless therefore, the terms of the voluntary arrangement indicates that the supervisor has become personally responsible for this aspect of the business, no special action is required in respect of any PAYE/CIS scheme (see INS3313).
Application for gross payment status
Applications for gross payment status from participants in voluntary arrangements present special problems because of the likely compliance failures. The guidance at CISR46130 details the action that you should take in these cases.