VAT on IVA legislation query

[ChrisJGB]

I was naturally overwhelmed by my family's willingness to help me out with my IVA when they offered to settle my IVA for me. The funds are immediately available to my creditors if the Full and Final Settlement Offer is accepted.

However, I have been informed that all Full and Final Settlements are on hold at the moment due to impending changes to the VAT legislation on F&F IVA Settlements. My Solicitors have informed me that it is out of their hands at the moment and there is nothing they can do.

I am trying to research into this situation but am struggling to find information about this on the internet.

I would be extremely grateful for any ideas on where I can locate information about this VAT issue.

Many thanks [:)]

[MelanieGiles]

Hi Chris and welcome to the forum

The VAT legislation has no effect on the ability of an IP to close a case based on a full and final settlement. Some IPs are choosing not to close cases until they have received the refund monies from HMRC, but in my opinion there is no real need to do this.

Which firm are you with - and have you spoken to your IP directly on this point yet?

[ChrisJGB]

Dear Melanie

Many thanks for your response. My Insolvency Practitioner is Debt Free Direct. The response they gave me two weeks ago was:

"Owing to recent changes regarding VAT in an IVA, legislation changes are in place. Industry-wide, all full and final cases have been put on hold until we receive a decision from them. We are hoping this will be within the next 2 weeks. However, this is out of our control. We appreciate your patience in this matter and would like to assure you we will deal with your case as soon as we have received an update."Regards
Chris

[MelanieGiles]

DFD have their own representative on the forum called Declan. Hopefully he will pick up your post and be able to let you know what this all means. I am afraid I don't see why full and final settlement cases ought to be held up - unless I am missing something.

[kallis3]

I've just picked up on this and have dropped Declan an email asking him to have a look if he can.

[ChrisJGB]

Melanie & Jan
Many thanks for your responses.
I look forward to hearing from Declan soon.
Kind regards
Chris [;)]

[newdidit]

I am in exactly the same boat and getting a little bit peeved now as I cannot see that this issue has anything to do with me or my offer.
Am I correct in thinking this a refund that companies can now or maybe they could before from the tax office. So how does that impact on acceptance of an offer.

[plasticdaft]

Why does it feel like some companies are running round in circles?

Paul

[ChrisJGB]

I requested further information yesterday about the legislation and the effects. This is the response I received:

In July 2011 a VAT Tribunal fundamentally changed the way in which VAT is chargeable on IVA fees. The effects of the change are complex, are applied retrospectively and consequently will take time to resolve.

The changes affect all IVA companies and every case will need to be reviewed. We are still awaiting some decisions and guidance from HMRC. Until that is received our regulators have recently issued guidance such that we should not proceed with the drafting of full and final reports.

We had hoped to be able to deal with this without affecting you but as we’re still awaiting a response from HMRC we thought we should update you . We are acutely aware that this delay may impact on our customers and case drafting/closure may be delayed. We are working extremely hard to minimize the impact. We believe that we may have a solution which allows us to progress cases independently of the VAT issue. We are taking legal advice and consulting with our regulators to get approval for the idea.

We are hoping that this process will be agreed within the next few weeks.

I understand that you are keen to conclude your IVA, but until the above process is complete, we are unable to draft your report.

This doesn't really provide much reassurance does it? This has been going on since July 2011!!! No wonder there is a backlog. I may as well forget the settlement altogether. By the way, I received this response from two different members of staff at DFD so it is obviously a standard response. I am so angry! [:(!]

Chris

[vince666]

font size="1" face="Verdana, Arial, Helvetica">quote:<hr height="1" noshade>Originally posted by ChrisJGB

I requested further information yesterday about the legislation and the effects. This is the response I received:

In July 2011 a VAT Tribunal fundamentally changed the way in which VAT is chargeable on IVA fees. The effects of the change are complex, are applied retrospectively and consequently will take time to resolve.

The changes affect all IVA companies and every case will need to be reviewed. We are still awaiting some decisions and guidance from HMRC. Until that is received our regulators have recently issued guidance such that we should not proceed with the drafting of full and final reports.

We had hoped to be able to deal with this without affecting you but as we’re still awaiting a response from HMRC we thought we should update you . We are acutely aware that this delay may impact on our customers and case drafting/closure may be delayed. We are working extremely hard to minimize the impact. We believe that we may have a solution which allows us to progress cases independently of the VAT issue. We are taking legal advice and consulting with our regulators to get approval for the idea.

We are hoping that this process will be agreed within the next few weeks.

I understand that you are keen to conclude your IVA, but until the above process is complete, we are unable to draft your report.

This doesn't really provide much reassurance does it? This has been going on since July 2011!!! No wonder there is a backlog. I may as well forget the settlement altogether. By the way, I received this response from two different members of staff at DFD so it is obviously a standard response. I am so angry! [:(!]

Chris

I'd like to know what that guidance is - I thought this was the latest guidance :

http://www.insolvency-practitioners.org ... 1-2012.pdf

As Mel stated, I don't believe there is any regulatory reason why they can't draft full & final's , it must just be their own internal policy.

[MelanieGiles]

I guess that some of us have been perhaps a little further ahead of the game than other firms - and some of us have taken decisions which suit our firms and clients which may not suit other firms. I am sure the whole think will be resolved for good by the end of this calendar year, and I am waiting with baited breath at the moment as HMRC have confirmed that they should be paying our own claim this week! (Am sure I will live to regret making that statement - but as we are closing cases in any case it really makes little difference.)

[chris135281]

I am in exactly the same situation with DFD and also received their blanket response.

If I was a cynical person, I might suggest that it was in DFD's best interest to not continue with F&F settlements, as it means they can reclaim full IP fees rather than the reduced amounts from early closures.

But I am not cynical.........at all.

[MelanieGiles]

I would have thought the fees would be similar if they are based on a percentage of realistions, which is now usual procedure Chris.

[tonyranks]

something sounds very fishy to me...i also is not cynical, but something is very smelly

[bobo]

Hi

On my proposal summary £1180 has been charged by my IVA provider for other fees and disbursements including non recoverable VAT. Is this connected? The reason I am wondering is that I would like to apply for a full and final and I am thinking if they have already charged for the non recoverable VAT why would they need to wait for HMRC to refund?