Please note that this is not related to the VAT on IVAs issue that is also a current hot topic on the blog. This is an update flowing on from our article on Friday July 15.
We have now received a response from the Insolvency Service after our Freedom of Information Act request and they have provided us with a copy of an internal Estates Account Directorate (EAD) memo on Secretary of State fees on VAT refunds dated February 2007. It is only fair to give credit where it is due and we thank the relevant people at the Insolvency Service for processing our request so promptly.
This memo confirms that Secretary of State fees should not be charged on VAT reclaims (see our earlier article to explain the italics) made by the office holder since that would mean “charging the original receipt twice.” The Insolvency Service has said nothing about this to IPs publicly despite having been aware of this issue since at least February 2007. The EAD memo goes on to say that “The onus is therefore on the IP to inform EAD if no Secretary of State fee is payable so EAD will charge the fee in the absence of any notification from the IP to the contrary.”
As indicated in our earlier article, we think that this is an approach to fees that would land an IP in hot water, but it is apparent from other feedback received in response to the earlier article that this is just another example of the gulf that sometimes exists between the reality of life as an IP and how the Insolvency Service perceives it. We would like to put the whole issue to bed as soon as possible and rather than banging on about how wrong we think that actions to date have been, we would like to focus on the solution.
If you have not already stopped having Secretary of State fees charged on VAT reclaims you should review all open cases and any closed cases where the sums involved might be worth the cost of reopening the appointment, which might include having companies restored. You should then submit claims to EAD requesting the refund of any incorrectly drawn Secretary of State fees, explaining that the monies concerned had already been subject to fees when the original realisations were paid into the estates.
In future, there is a very simple solution, in that any time you are submitting funds to the ISA there is a box to tick on the ISA paying in slip that indicates that fees should not be charged. You should tick that box and then explain to EAD should they contact you that the funds are VAT reclaims that should not attract fees. If the funds were not paid into the ISA using a paying in slip then you should send an explanatory letter.
It will not help to continue to bemoan the fact that the Insolvency Service could have issued something much earlier and certainly by February 2007 when they we aware of the potential problem in EAD. It is too late to rectify the omission, but we would welcome an article in a subsequent edition of Dear IP to inform IPs about the potential for refunds and the method for avoiding the incorrect fees being charged again via the simple tick box on the paying in slip.
