September 2006

77.63 Form of proof

Proofs of debt submitted by government departments need not be in the strict form prescribed by the Insolvency Rules 1986, provided that the proof contains all such particulars of the debt as are required in the form used by other creditors and as are relevant in the circumstances [note 1]. For further information of proofs of debt see Chapter 16, Part 5.

A proof may be lodged for all the tax liabilities and revenue debts existing at the date of the insolvency order, irrespective of when they are due and payable. Such liabilities include sums due from the insolvent on account of deductions of income tax from emoluments paid and in respect of deductions from payments to subcontractors in the construction industry. If HMRC is awaiting receipt of a bankrupt’s self assessment return, there may be a delay before a claim can be notified to the official receiver or the claim may have to be based on incomplete information. To overcome such difficulties, in cases where there is to be a distribution to creditors, especially in the early stages of a case, HMRC will submit a provisional claim (taking into account any payments of tax made) based on historic information. Although a proof of debt may be based on an estimated assessment(s), the tax is legally due and payable on the due date. It is final and conclusive unless an appeal has been made within the statutory 30 day period. Accordingly, it should generally be accepted as part of a claim for voting purposes but this does not affect the chairman's right to reject proofs of debt not considered to be valid [note 2].

In cases where the petition was presented on or after 15 September 2003, HMRC have no general preferential status. The Enterprise Act 2002 amends Schedule 6 to limit those creditors that will be entitled to make a preferential claim.

In cases where the winding up order or bankruptcy order was made prior to 15 September 2003, a debt to HMRC is considered to be preferential when it constitutes :-

1. Sums due at the relevant date from the debtor on account of deductions of income tax from emoluments paid during the period of 12 months next before that date. The deductions referred to are PAYE deductions that the debtor was liable to make less the amount of the repayments of income tax which the debtor was liable to make during that period, and
2. sums due at the relevant date from the debtor in respect of deductions required to be made in the same period under the construction industry subcontractors scheme.

77.64 Excessive claims in proofs of debt

Where a proof of debt is lodged by HMRC but it is claimed that;

• the bankrupt had no income or capital gains assessable for the year concerned, or
• the company had no liability to tax, or
• the bankrupt or company consider the assessments to be excessive;

HMRC will forego as much of the claim as appears to them to be excessive on receipt of the following;

• an affidavit by the bankrupt or, for companies, by the secretary or other officer of the company, setting out the grounds of the claim.
• where an affidavit by the bankrupt or company officer cannot be obtained, a certificate by the trustee or liquidator may be submitted instead but this must also explain the reasons for failure to furnish an affidavit [note 3].

Relief from tax on account of personal allowances or other reliefs should be claimed by the bankrupt using forms available from HMRC. Where claims for relief cannot be obtained from the bankrupt, HMRC may accept a certificate by the trustee provided this includes the information necessary for HMRC to determine a claim. Any waiver of claim referred to above does not extend to tax which the bankrupt or company was entitled to deduct from any interest paid from money, annuities, royalties or any other sums paid in respect of a patent or copyright or other annual payment from which tax should have been deducted.

[Back to Part 9 - Assessments, appeals, distress and refunds]