The Insolvency Service is today launching a six-week consultation with its staff on potentially reshaping the way in which it carries out the bulk of its business and delivers its services going forward. The “Delivery Strategy – Shaping our future” consultation will run from Monday 27 June – Friday 5 August 2011.

In developing the new strategy, with the help of its staff, The Service aims to build a more flexible, efficient and effective organisation fit for the future. And one that is more responsive to the changing needs of its customers and able to fulfil those needs at a lower cost. When The Service needs to see customers face-to-face it will continue to do so; otherwise it is proposed to focus business into fewer, larger regional centres, offering lower-cost services and the prospect of richer career pathways for staff.

The Service is also consulting staff on the option of closing a small number of offices over the next few years. This comes in response to falling case numbers and the subsequent need to drive down the cost of its accommodation estate. If, following this consultation, a decision is taken to close any offices, The Service will launch a full public consultation on the specific proposal.

Having recently conducted a large voluntary exit scheme, The Service has no plans to make any staff redundant as a result of this development.

The Service recognises that any changes to service delivery will impact on key stakeholders and therefore the Delivery Strategy consultation will be shared with some external organisations.

All Insolvency Service staff and its trade unions are being encouraged to participate fully in this consultation. During August the Directing Board will review the responses with the aim of sharing the responses with colleagues and stakeholders in September.

If you would like a copy of the consultation please send your request to david.ward@insolvency.gsi.gov.uk

In July 2010 The Insolvency Service offered BIS a carefully considered plan to meet the 11% cuts agenda.

The Insolvency Service administers the insolvency regime investigating all compulsory liquidations and individual insolvencies (bankruptcies) through the Official Receiver to establish why they became insolvent. The Service also authorises and regulates the insolvency profession; deals with disqualification of directors in corporate failures; assesses and pays statutory entitlement to redundancy payments when an employer cannot or will not pay employees; provides banking and investment services for bankruptcy and liquidation estate funds; and advises ministers and other government departments on insolvency law and practice. Further information about the work of The Insolvency Service is available from http://www.insolvency.gov.uk

The Service operates over 35 locations in England, Scotland and Wales and currently employs approximately 2,100 members of staff.

If you would like discuss how our Debt Collection service can assist your business, please visit the Debt Collection section on our website,  contact us on +44 (0) 151 515 3014 or email us.

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The OFT should highlight the obligations of consumers, as well as collectors, and not allow its new Guidance on debt collection to be used as a reference guide for debt avoidance.

The warning, from the Credit Services Association (CSA), follows concerns expressed by its Members that whilst it is correct for the industry and the OFT to work closely together in ensuring best practice – especially since it was the CSA that called for a review in the first place – the information and issues being raised were in a public document that could be used for nefarious means:

“It is important that there is a statement from the OFT that clearly says how the Guidance is intended to be used, and how it is emphatically not a document for consumers and third party representatives to use as a debt avoidance tool,” says Claire Aynsley, Head of Membership, Compliance and Educational Services for the CSA and its sister body, the Debt Buyers and Sellers Group (DBSG).

“It is important also that everyone should work within the spirit of the Guidance, and it would be most helpful for that point to be stated clearly from the outset.”

In a 40-page response to the consultation, the CSA also expresses specific concerns over the need for tracing agencies to hold a consumer credit license (CCL): “The draft includes ‘tracing’ as a debt collection activity that therefore requires the tracing agent to hold the appropriate license and prove their competence according to current legislation,” Claire explains.

“But this simply won’t work. The majority of tracing agents undertake no collection activities; no payments are received or negotiated, and as such how are they intended to prove their competence for an activity they do not do?”

The CSA also believes that specific mention should be made in the Guidance to the obligations of Credit Reference Agencies (CRAs) in terms of data accuracy: “We appreciate that CRAs are not responsible for the data which is uploaded to their systems,” Claire continues.

“They should, however, have a responsibility for ensuring that the data then forwarded to a third party has undergone some form of ‘cleanse’ before supplying. This is crucial to avoiding ‘mis-trace’ issues further down the line, especially when a debt has been sold. It is not enough simply to state that some information supplied may not be accurate. That does not seem to be in the spirit of the new proposals.”

Members of the CSA account for more than 90 percent of the UK debt collection industry and are instructed to collect up to £20 billion each year. Its Members are also obliged to undertake more than 15 million ‘traces’ each year as a result of debtors who have ‘gone-away’.

If you would like discuss how our Debt Collection service can assist your business, please visit the Debt Collection section on our website,  contact us on +44 (0) 151 515 3014 or email us.

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The rate of company failures has gathered pace during Q2 of 2011 and is expected to rise by three per cent on Q1 according to the Graydon Insolvency Predictor.

Based on data published today by the commercial credit reference agency Graydon UK, the number of corporate insolvencies is still expected to be 6.2 per cent lower than during Q2 of 2010, but remains above the number of company failures recorded during Q2 of 2008, in the run up to the financial crisis.

Gordon Skaljak, spokesperson at Graydon UK commented: “This is the first indication of the long expected upward swing in businesses failures that traditionally has followed a downturn. This was last seen following the dot com bubble and the recession of the early 1990s.

“The impact of the Government’s public spending cuts is now beginning to be felt, leading consumers to rein in their spending. Many consumers are only just beginning to feel the impact of rising inflation and below-inflation pay increases, resulting in a great deal of pain for high street retailers.

“In addition, HM Revenue & Customs has announced that it will not publish figures on the Time to Pay scheme after July, indicating that perhaps the scheme is winding down and the removal of this support is likely to make it increasingly difficult for businesses to keep their heads above water.

“Any indication that insolvencies are on the rise will be met with alarm by businesses who fear the knock on effect of company failure. Businesses will need to think even more carefully about the risks of doing businesses with their current customers and suppliers, particularly those with links to consumer facing industries, and monitor them regularly for any signs that they may be in financial difficulty.”

If you would like discuss how our Debt Recovery service can assist your business, please visit the Debt Recovery section on our website,  contact us on +44 (0) 151 515 3014 or email us.

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The UK has one of the highest tax burdens for both low and high earners of any major economy, reveals new research by UHY, the international accounting and consultancy network.

The UK is ranked 7th out of 19 countries according to how much tax it takes from high and low earners’ wages. The tables (below) rank countries from highest tax burden first to the lowest tax burden last.

UHY studied tax data in 19 key countries across its international network, including members of the G8 as well as key emerging economies. Each country was asked to calculate the ‘take home pay’ for low and high income workers taking into account personal taxes and social security contributions. The calculations are based on a single, unmarried taxpayer with no children.
The UK was ranked 7th out of 19 for taxes on low earners and 7th out of 19 for taxes on high earners. Low earners were defined as workers earning USD$25,000 per annum while high earners were defined as workers earning USD$200,000 per annum.
Only Mexico, Estonia, Italy, France, India and Germany take more in tax and social security than the UK from an employee earning USD$25,000. For a person earning USD$200,000 again only six countries – France, Israel, Germany, Ireland, the Netherlands and Italy – take more in tax and social security contributions than the UK.

Mark Giddens, Private Client Partner of UHY Hacker Young in the UK, member of UHY comments: “The Government is now facing a difficult dilemma. Achieving a more sustainable fiscal position will be difficult without raising taxes, but higher taxes are likely to hinder economic growth.”

“The 50% tax rate on people earning more than £150,000 a year, combined with increases in National Insurance, has undoubtedly made the UK less attractive to high earners. Many of these people will be highly skilled and they are usually very mobile. The UK risks losing skills and capital if high earners are taxed significantly more than competitor countries.”

“Companies look at personal tax rates when choosing where to locate. If the tax burden is too high, they may struggle to attract the necessary talent.”

For high earners the difference in the amount of tax collected between the highest taxing country – Italy – and the lowest taxing (excluding Dubai) – Russia – is USD$65,811, which means than a person earning USD$200,000 per annum in Italy would pay over three times as much tax and social security as the equivalent person in Russia.

The UHY research reveals that for low earners – excluding Dubai – the difference in the amount of tax collected between the highest taxing country – Germany – and the lowest taxing – Ireland – is US$5,788, which means than a person earning US$25,000 per annum in Germany would pay over six times as much in tax and social security as the equivalent person in Ireland.

Mark comments: “Low earners in the UK pay more in tax than many of the Western countries we studied – with the exception of Italy, France and Germany. If the Government is serious about trying to reform the benefits system and incentivise people to take low paid jobs, it needs to look at this. It will be interesting to see how the UK ranks once the tax free personal allowance has been increased to £10,000.”

If you would like discuss how our Debt Collection Company service can assist your business, please visit the Debt Collection section on our website,  contact us on +44 (0) 151 515 3014 or email us.

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The Debt Management Standards Association (DEMSA) has slammed rogue traders following a BBC investigation which broke the news that some debt management companies have been holding on to clients’ money rather than paying it to creditors.

Michael Land, Chairman of the DEMSA, advised any customer seeking to use a debt management company to look for the DEMSA and OFT logo for reassurance that they are dealing with a reputable firm which is committed to the high standards set out in the DEMSA Code of Conduct.

Mr Land said: “DEMSA condemns in the strongest terms these completely unacceptable practices and we support the OFT in taking tough action against these rogue firms in the debt settlement industry.”

Under the terms of the OFT debt management guidance notes, any monies held on behalf of consumers must be kept in a client account not usable by the firm for the purposes of its own business.

Kevin Still, director at Atlantic Financial Management, said: “As DEMSA’s most recent member, Atlantic Financial Management has joined at a crucial stage in the evolution of the debt solution market, where consumer’s require absolute confidence in the providers they use to obtain all-round debt advice and, if appropriate, a managed debt solution. This must include demonstrable evidence that their paid funds are held in a client account and promptly distributed to their creditors. Monthly statements are a minimum requirement.

“Consumer education needs to be improved with the regard to some of the so called ‘hybrid’ operators that are not genuine Debt Management Companies, where funds are not disbursed to creditors, but instead a ‘war chest’ is built up by the provider to offer debt settlement offers to the client’s creditors. We are hopeful that the updated OFT Debt Management Guidance will highlight unacceptable practices and those that can cause consumer detriment.”

DEMSA is the only trade body in the sector to have received approval of its code under the OFT’s Consumer Codes Approval Scheme. As the principal trade body in the sector it works closely with the OFT to help promote high standards in the industry.

Membership of DEMSA is reliant upon debt management companies being able to demonstrate that they comply with the standards set out in the DEMSA Code of Conduct. All members are subject to ongoing stringent checks to ensure they adhere to the both the Code and OFT guidance.

Mr Land added: “DEMSA ensures that all its member firms have safeguards in place to protect the consumer. All member firms have to keep customers’ money ring fenced in trust accounts and provide a compliance certificate that they are maintained satisfactorily by a chartered accountant. Firms belonging to DEMSA must also pass on clients’ payments to the consumers within five working days.”

If you would like discuss how our Debt Collection service can assist your business, please visit the Debt Recovery Services section on our website,  contact us on +44 (0) 151 515 3014 or email us.

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Law Report: Cashing cheque was not conclusive: Stour Valley Builders (a firm) v Stuart and another – Court of Appeal (Lord Justice Lloyd and Mr Justice Connell), 21 December 1992

The keeping and cashing, by the creditor, of a cheque sent by the debtor in full and final satisfaction of a larger claim, was not conclusive evidence of accord and satisfaction, and the question whether the cheque was accepted in full and final satisfaction remained one of fact for the court.

The Court of Appeal dismissed an appeal by Mr and Mrs T P Stuart from the decision of Assistant Recorder Akast, sitting in Sudbury County Court on 5 May 1992, giving judgment for the plaintiffs, Stour Valley Builders, on a claim for sums unpaid under a building contract.

David Pugh (Bankes Ashton, Bury St Edmunds) for the defendants; John Brooke-Smith (Bates Wells & Braithwaite, Sudbury) for the plaintiff.

LORD JUSTICE LLOYD said that the plaintiffs sent the defendants a revised invoice for pounds 10,163 for building works they had done on the defendants’ home. The defendants considered it too high. The amount in dispute was about pounds 3,000. The defendants offered to settle for pounds 8,471, sending a cheque for that amount ‘in full and final settlement’. The plaintiffs kept and cashed the cheque. But they told the defendants by telephone that the cheque could not be accepted in full and final settlement.

The assistant recorder found as a fact that there was no agreement between the parties to accept the cheque in full and final satisfaction of the claim. The defendants appealed.

In the United States, the rule appeared to be that ‘the use or retention of the cheque by the creditor, with knowledge of the condition (that it was sent in full and final settlement) is regarded as an assent to it’: see Williston on Contracts (3rd edn) para 1854.

Mr Pugh urged the court to adopt the American rule. It had its advantages, but there were analytical and conceptual difficulties. Accord and satisfaction depended on the debtor establishing an agreement between the parties whereby the creditor undertook for valuable consideration to accept a sum less than the amount of his claim. As with any other bilateral contract, what mattered was not what the creditor himself intended, but what, by his words and conduct, he had led the other party as a reasonable person, in this case the debtor, to believe.

If the creditor, at the very moment of paying in the cheque, made clear he did not assent to the debtor’s condition, how could it be said objectively that he had accepted the debtor’s offer?

In his Lordship’s judgment, there was binding authority that no such rule applied in England. In Day v McLea (1889) 22 QB 610, the Court of Appeal held in similar circumstances that keeping the cheque was not, as a matter of law, conclusive that there was an accord and satisfaction of the claim, but it was a question of fact on what terms the cheque was kept.

Though the cheque was not cashed in that case, it had been in the earlier case of Miller v Davies (unreported), where the Court of Appeal, in a decision which was followed and approved in Day v McLea, declined to interfere with a jury’s decision that, despite the cashing of the cheque, there had been no accord and satisfaction.

It followed that it was for the assistant recorder in this case to decide on the facts whether the plaintiffs accepted the defendants’ offer so as to create accord and satisfaction.

Cashing the cheque was strong evidence of acceptance, as was delay before rejection of the offer; but neither factor was conclusive. Here the delay before rejection was brief, and the recorder was entitled to conclude as he did.  Mr Justice Connell agreed.

An interesting case that is still applicable to this day within the Commercial Credit Management industry.

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