Corporate Restructuring And Insolvency Update: Finance Bill 2013

Author:Mr Tony O'Grady, Julie Murphy-O'Connor and Niamh Counihan

The Finance Bill 2013 introduces a number of provisions that impact on the VAT treatment of transactions involving liquidators, receivers and mortgagees in possession (the "Insolvency Practitioners"). These provisions were largely expected following the consultation process on the tax implications of appointing a receiver which has been ongoing since July 2012.

Under the current legislation Insolvency Practitioners are required to register for and account for VAT on supplies of goods which they make, which involve the assets under their control. The Bill extends the scope of this obligation and provides that a person (including a reciever of a liquidator) who supplies taxable services in or towards the satisfaction of a debt owed by the accountable person (ie, the borrower), in the course of carrying on or winding up a business, for example the operation of a hotel or the letting of a property, is liable for VAT on those services / rents. We understand that in practice many Insolvency Practitioners were already accounting for VAT on the provision of such services in the course of carrying on or winding up a business, however the Bill provides clarification in respect of this obligation.

The Bill also clarifies the position in relation to adjustments arising under the Capital Goods Scheme (CGS). In summary, if a borrower has recovered VAT incurred on the acquisition / development of a property and the property is put to a VAT exempt use or sold without charging VAT, a partial clawback of the VAT previously recovered by the borrower arises (the "CGS Adjustment"). Where an Insolvency Practitioner makes a VAT...

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