Rogers & Norton News


Need Time to Pay? HMRC at your Door?

Thursday, November 24, 2016


Faced with bankruptcy? Need time to pay?

Our Litigation Team acts for Creditors, Debtors, Companies, Partnerships and individuals, locally, nationally and internationally and in doing so also oppose and defend claims made by Banks and HMRC, and when appropriate negotiate payment terms. What happens if as an Individual debtor, you wish to avoid bankruptcy? Acting for both creditors and debtors, our team has expert knowledge of this.

Peter Hastings comments “The Courts have a discretion to adjourn the hearing of a petition where there is a reasonable prospect of the debtor being able to pay the entire debt within a reasonable time. Repeated adjournments for this purpose are unlikely. It is not uncommon for creditors to be faced with opposition from debtors on the grounds that they are able to pay the debt, but not straight away, or that such payment is contingent on another future event, such as the sale of a property. Under Section 271(3) of the Insolvency Act 1986, the court may dismiss the petition if it is satisfied that the debtor is able to pay all his debts or is satisfied:

(a) that the debtor has made an offer to secure or compound for a debt in respect of which the petition is presented,

(b) that the acceptance of that offer would have required the dismissal of the petition, and

(c) that the offer has been unreasonably refused;

and, in determining for the purposes of this subsection whether the debtor is able to pay all his debts, the court shall take into account his contingent and prospective liabilities.


What constitutes unreasonable refusal of an offer?

Elizabeth Gibson adds: “This is a question which has formed the basis of much litigation in recent years, and 2016 is no exception. In HMRC v Garwood, the Court listed a number of points to consider including:-

• The starting point is to ask whether a reasonable hypothetical creditor in the position of the petitioning creditor would accept or refuse the offer, bearing in mind, however, that there could be a range of reasonable positions which such a creditor could adopt.

• The test is objective.

• The court must look at the position at the date of the hearing.

• The court is not limited to considering the matters taken into account by the petitioning creditor when the offer of security was refused; it must look at all the relevant factors and their impact on the reasonable hypothetical creditor.

• That includes the history.

• The debtor must be full, frank and open in providing the necessary information to enable the creditor to make an informed decision.

The threshold set down in s. 271(3) is a high one for a debtor to overcome. Where the prospective sale of a property forms the basis of an offer, it seems that such a sale would need to be imminent and enable at least a large proportion of the petition debt to be discharged. It seems that the courts will have less sympathy where there is no definite sale in place, particularly where there is an innocent co-owner to consider. Furthermore, it does not appear that courts will find it unreasonable for payment of only part of the debt to be rejected as a settlement. Ultimately given the broad discretion that the court has, decisions will be fact-sensitive, and each case will turn on its own individual facts”

The Team recently successfully opposed an application to adjourn a bankruptcy hearing and secured full payment plus costs and interest for the creditor. In acting for a debtor, the team secured favorable terms for repayment of a debt to HMRC and in doing so prevented a Bankruptcy Order being made. We are able to assist both creditors and debtors on all insolvency matters and debt recovery claims, including claims against HMRC.

For more information please contact either:

Peter Hastings on 01603 675639 or e-mail Peter Hastings

Elizabeth Gibson on 01603 675641 or e-mail Elizabeth Gibson