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Council Rates are Provable Debts in a CVA

A recent decision of the High Court in Kaye v South Oxfordshire District Council and another [2013] EWHC 4165 (Ch) held that a company's entire annual liability for non-domestic property rates could be considered a contingent debt where that company went into a CVA part way through the rateable year.  This was a despite the ratepayer having a statutory entitlement to pay the rates by instalment.

The Insolvency Service updated its Technical Manual in January 2014, so that the entire unpaid amount of Council Tax for the year in which the bankruptcy order is made will be a provable debt in the bankruptcy.  PLC Magazine also reports that the Insolvency Service has issued a note to official receivers advising them that all outstanding liabilities for council tax and non-domestic (business) rates for the year in which the insolvency commences are provable debts and that this applies whether or not the company or bankrupt was in arrears at the date of insolvency.

The decision opens the way for debtors to try and compromise the entire annual debt in their arrangement with creditors and may also mean that Insolvency Practitioners do not need to treat the rates as an expense of the CVA.    

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