COM130052 | Notices and returns: companies subject to a Company Voluntary Arrangement

Where a company is insolvent and struggling to pay off debts with creditors, it has the option to enter into a Company Voluntary Arrangement (CVA).

A CVA is a formal insolvency procedure that allows a financially distressed company to reach a legally binding agreement with its creditors to repay all or part of its debts over a fixed period of time.

CVAs are administered by insolvency practitioners who will draft a proposal detailing how the company will pay off its creditors. Creditors vote on the proposal at a Meeting of Creditors (MoC) and at least 75% (by value of debt) of creditors voting must approve it for it to proceed.

HMRC is entitled to claim all known debt outstanding at the date of the MoC. Where HMRC votes in favour of a CVA, we include standard modifications to the company’s proposal as a condition of our support. One such condition is that only HMRC debts relating to accounting periods ending on or immediately before the date of the MoC will be included in the CVA. Corporation tax liabilities arising from accounting periods ending after the MoC date will not be included. These must be paid in full at the usual due date(s) even if they relate to transactions that occurred prior to the MoC.

Companies have the option to shorten their accounting period so that it ends on the day before the MoC. Doing so would ensure that all corporation tax relating to pre-CVA transactions is included in the CVA.