It is surprising just how many directors don’t understand the importance of the role of HMRC when considering a Company Voluntary Arrangement (CVA). Although they know that the taxman will want money due to Her Majesty’s Revenue & Customs, it somehow doesn’t dawn on them that HMRC is, for all intents and purposes, a secured creditor. In fact, in many cases, HMRC is owed the greatest amount of money and thus becomes the main concern when wooing them into a CVA.
It may seem at the moment as though you are climbing a steep, uphill battle, but with the right strategies, even the taxman can be won over to your side. Here is how we approach it at Real Business Rescue along with some brief facts that should ease your mind during this stressful time.
One of the most important aspects of a CVA is the fact that your secured creditors must agree the terms of a CVA. However, it doesn’t stop there because there must be a consensus of at least 75 percent in terms of value, not creditor numbers.
Quite often your largest debt is to the taxman so you can see how HMRC would play such an important role! It stands to reason that if you are having trouble paying suppliers, rent and even payroll, you are probably late on PAYE and NIC as well!
The thing working in your favour is that government wants to get paid but they also recognise the value of keeping UK businesses afloat. This keeps workers in jobs and helps to stabilise the economy. We have successfully negotiated with HMRC so that they agree the terms of the CVA in most cases, sometimes with minor adjustments.
It is especially important to choose your Insolvency Practitioner wisely because under some conditions, a creditor can apply to have the court agreed CVA revoked, or at the very least revised. Usually this is in terms of some irregularity in meetings or that said creditor feels as though they have been unfairly prejudiced within the agreed CVA.
We will never endeavour to recommend recovery options without your full comprehension because your understanding is a vital part of the business rescue process.
Experienced IPs such as Real Business Rescue know that any secured creditor who was entitled to be a party to the CVA can (and will!) challenge what they consider to be an unfair CVA. Amongst many other reasons for carefully choosing an Insolvency Practitioner, this is of prime importance. Not only can the agreed CVA be overturned, but it will greatly delay any progress in terms of turning a distressed business around.
14th February 2019
The bakery chain business Patisserie Valerie has been acquired out of administration by an Irish private equity firm called Causeway Capital Partners.Read More
13th February 2019
The department store operator Debenhams has secured access to a £40 million credit facility that should help it cope with the pressures of its ongoing funding crisis.Read More