The official receiver will always need to bear in mind the possibility that the records concerned may, although no longer required for his/her purposes, be needed for other reasons, perhaps not directly involving him/her.
The records of an insolvent must be preserved:
10.46 Effect of VAT legislation
The official receiver's powers to destroy, sell or otherwise dispose of the insolvent’s books, papers and records whilst acting as liquidator or trustee [note 1] are subject to the limitations imposed by the Value Added Tax Act 1994. A trader registered for VAT is obliged to retain certain records, as described in the HM Revenue and Customs public notice number 700, for a period of six years from their creation. In effect this means that a registered trader cannot dispose of most of his/her records until they are six years old without the express permission of HM Revenue and Customs. Unauthorised disposal or destruction is a breach of regulatory requirements giving rise to a civil penalty. These provisions continue to apply where a company goes into liquidation or an individual becomes bankrupt, even if the trader concerned has been, or subsequently becomes, de-registered for VAT purposes.
10.47 Contact with HM Revenue and Customs
All communications to HM Revenue and Customs concerning the destruction or preservation of records should be sent to HM Revenue and Customs, Insolvency Branch, Queen’s Dock, Liverpool, L74 4AA, (Telephone : 0151 703 1200).
To ease the burden on the official receiver as regards the preservation of records the Insolvency Service has agreed special provisions with HM Revenue and Customs for the early disposal of records, subject to certain formalities. Where records are less than 6 years old but more than a year has elapsed since the bankruptcy/winding up order was made, the records may be destroyed without reference to HM Revenue and Customs.
Where the insolvent is registered for VAT and destruction of books and papers is appropriate in a case where records are less than 6 years old and less than a year has elapsed since the bankruptcy/winding up order was made, notification [note 2] should be sent to HM Revenue & Customs, Insolvency Operations, 3NW, Queens Dock, Liverpool L74 4AA. The second page of this form shows several options and should be completed and returned by HM Revenue and Customs. The official receiver's records should then be noted with their decision and the books and papers dealt with accordingly, i.e. preserved or destroyed. The completed notification form [note 2] should then be placed on the office file.
Although the strict legal position in relation to a company being wound up by the court is that on dissolution, as the official receiver ceases to be liquidator ex officio and the company ceases to exist, the requirement to preserve records also lapses, the agreement with HM Revenue and Customs includes, subject to what is said in paragraph 10.66 below, records of a dissolved company.
Tax regulations generally require records to be kept for 22 months after the last self assessment form has been completed by the tax payer (unless a trader or involved in letting property when the period is 5 years and 10 months after the last self assessment form has been completed), but special arrangements have been made with HM Revenue and Customs in bankruptcy cases so that the trustee is not required to keep the records.
If the Inland Revenue has commenced a formal enquiry into a return, the records must be kept until the enquiry is completed even if the time limit for keeping the records has expired.
In all cases, before destroying the books and papers the official receiver must write to the local tax office to confirm whether they need to inspect the records by sending the notification form [note 2]. The form contains a tear off sheet for HM Customs and Revenue to complete, indicating whether they wish the records to be retained for inspection. The returned form should be placed on the office file and the records dealt with accordingly i.e. preserved or destroyed.
If the form is not returned within three months, then the records may be destroyed without further reference to HM Revenue and Customs.
10.51 Cases of urgency
Where urgent authority is required (e.g. to avoid having to take possession of vast quantities of papers), the "expedited treatment requested" box on the letter should be ticked and telephone contact should be made with HM Revenue and Customs to put them on notice that such a request is being sent. This will enable HM Revenue and Customs to respond more quickly to the request. The "expedited treatment requested" box should only be ticked in those circumstances and not used as a matter of course.
10.52 Large quantities of records
Where a request from HM Revenue and Customs results in the need to retain large quantities of records, HM Revenue and Customs should be invited to make an early inspection of those records with a view to identifying those in respect of which retention is vital. It may be that on inspection it will become apparent that much of the material can in fact be destroyed and appropriate steps can then be taken.
10.53 Records more than six years old or no VAT involvement
The age of a business record is determined by the date of the last entry in it. Where records are on that basis more than six years old they can be destroyed without reference to HM Revenue and Customs. Where records are those of a person not registered for VAT, they can be destroyed at any time without reference to HM Revenue and Customs . Where there is no VAT registration, but it is apparent that the person concerned should have been registered, HM Revenue and Customs should be notified and the case treated for the purpose of these provisions as if there had been a registration.
For policies which were in force on 31 December 1998 or later there is an obligation on employers to retain employers’ liability insurance policies for 40 years, to facilitate employees who may successfully claim damages against the employer in this period to gain a financial settlement [note 3]. Claims made which could involve such a protracted period are for example those involving exposure to asbestos. There is no guidance in the legislation as to where such certificates should be stored where the employer has ceased to trade. Any employers’ liability insurance certificates which are recovered should be retained by the official receiver in files maintained for that purpose as detailed in the Employees Liability Insurance Certificates Registration Process Guidance which can be viewed on the PSP pages of the intranet.
If the official receiver is contacted by an employee of a company who wishes to trace the insolvent employers’ insurance details and there is no policy document contained in the records/details of the insurance are not contained on the file, he/she should draw the employee’s attention to The Code of Practice for Tracing Employers’ Liability Insurance Policies, introduced in November 1999, copies of which are available free from: HSE Books on 10787881165 or from www.dwp.gov.uk
The purpose of this code is to help employees to trace insurance policies arranged by the employers in the past and to ensure that insurers keep future records in ways which will help making such policies easier in the future.
10.55 Asset realisation
If assets, especially book debts, remain unrealised, care should be taken not to destroy any records which could be useful in this connection and, after realisation or write off, any relevant documents or papers should be retained to enable points to be dealt with on, for example, the application for release.
10.56 Administrative receivership
If an administrative receiver is in office where a company is being wound up the receiver should always be asked in writing whether he/she wants any records to be retained [note 4].
10.57 Civil proceedings
If it is known that there are civil proceedings, or the possibility of them, in connection with the affairs of a company, partnership or of the bankrupt, the persons concerned should always be asked in writing whether they wish any records to be retained. This may, for instance, involve an insurance claim by a former employee for industrial injury. The official receiver should always try to ascertain the precise records concerned to avoid the unnecessary retention of large quantities of papers, and in any case full details of the insolvent’s insurers and insurance documents held by the insolvent should be retained on the official receiver’s file, in order to avoid the possible loss of this information.
10.58 Company pension scheme
If it is known that there is a company pension scheme, it is advisable for any relevant papers, including policies, trust deeds, rules or equivalent documentation, and the wages records, to be identified and separated at an early date from the remainder of the records. Unless the official receiver is certain, from consultation with other parties concerned, that those records will not be needed in connection with the pension fund, they should be preserved until they are no longer required. If no information can be obtained as to the need for their preservation, the relevant records should be retained for two years after the company’s dissolution and then destroyed.
10.59 Discharge application
If the bankrupt has to apply to the court for his/her discharge [note 5]., it may be necessary to retain records which are likely to be referred to at the hearing.
10.60 Historical interest (general)
Consideration should be given to whether any records might be considered to be of historical interest and ought to be preserved. If so, or if interest in any documents has been expressed by any body, such as a local museum, the Public Record Office, the British Archives Association or the Royal Commission on Historical Manuscripts, the matter should be referred to The Service’s Accounting Records Officer at HQ Birmingham. If appropriate, arrangements can then, be made for the body concerned to have the records on a permanent loan basis.
10.61 Historical interest (insurance companies)
Records of insurance companies or insurance brokers should not be destroyed without prior reference to the History Committee of the Chartered Insurance Institute, at 20 Aldermanbury , London EC2V 7HY (telephone: 0207 417 3574) who may wish to arrange for the preservation of some or all of the records.
10.62 Public Examination
If there is a real possibility of a public examination being held [note 6], or of such proceedings where adjourned being revived, consideration should be given to whether any records are likely to be used in that connection.
10.63 Rescission, annulment or stay
If it is likely that a rescission, annulment or stay of any insolvency proceedings is likely to be applied for [note 7], records should not usually be disposed of under normal procedures. Where in a winding up a stay is ordered, records should be disposed of as directed by the court or, if no such direction is given, returned to the company. Where a bankruptcy order is rescinded or annulled, any records held by the official receiver should be returned to the bankrupt. If any difficulty arises as regards the return of records, or if, notwithstanding an annulment, a prosecution has been proceeded with, the matter should be raised with either Technical Section or the Criminal Allegations Team.
10.64 Solicitor’s or accountant’s client records
The papers of clients of bankrupt solicitors or accountants belong to the client and cannot be routinely destroyed; such papers should be returned to the clients. If a client cannot be traced or there are other reasons why papers cannot be returned, the matter should initially be referred to The Law Society or the accountancy body of which the bankrupt was/is a member.
10.65 Requests by third parties
If any person has asked that records be preserved and has given a good reason for this, the records concerned should not be destroyed without further reference to that person. Where the person concerned does not have a statutory right to require the records to be preserved, they are not being retained for the purpose of criminal or disqualification proceedings, or in relation to other matters in which either the official receiver or the DTI generally has a direct interest, and the records are voluminous, the person concerned should be informed that if preservation is required he/she will have to pay the storage charges.
10.66 Dissolved company
Where a company has been dissolved [note 8]. records can be destroyed without reference to HM Revenue and Customs, whether or not destruction takes places within the first year after the winding-up order, so long as HM Revenue and Customs have been sent notice of the winding-up order and also either notice of intended early dissolution or notice that the official receiver intends to apply to the Secretary of State for his/her release, whichever is appropriate. If HM Revenue and Customs are not creditors (or in the case of the official receiver applying for his/her release have not notified the official receiver of their debt [note 9]) and would therefore not normally receive either of the latter notices, an equivalent notice should in any event be sent to HM Revenue and Customs if the company was or should have been a VAT-registered trader.
10.67 Statutory provisions for destruction
The Insolvency Act 1986, section 411 generally, and paragraph 25 of Schedule 8 and paragraph 29 of Schedule 9 specifically, enable the destruction of records in liquidations and bankruptcies to be dealt with by the Rules. Rule 12.1 enables the relevant provisions to be made in the Regulations.
The Insolvency Regulations 1994, regulations 16 and 30 permit the destruction (sale or other disposal) of the insolvent’s records in a winding up by the court and bankruptcy by the official receiver whilst acting as liquidator or trustee.
In every case a form BPDC (Books and Papers-matters to be considered before destruction) should be completed, signed by the official receiver and passed to the officer responsible for the storage and destruction of books and papers.
If the instruction "preserve all records for the time being" has been given, each office must have a system for ensuring that the records can be inspected until they are no longer required and that they are not kept in storage any longer than necessary.
10.68 Records not to be returned to bankrupt or director
Except where a bankruptcy order has been annulled or rescinded, any request from a trustee in bankruptcy for approval to dispose of records by returning them to the bankrupt should be refused, as should any request by a liquidator to return them to the company’s directors. Similarly, the official receiver should not dispose of records by returning them to the bankrupt or, in a liquidation, to the company’s directors. The only exception to this would be if a bankrupt or director has identified papers as personal and if they are not relevant to the administration they should be returned against a receipt. If any bankrupt or director persists in requests that records be returned to him/her the matter should be reported to Technical Section.