INS12653 - Accounting issues: Dividends

Although some dividends are received early and without the need for a reminder the monitoring of dividends and the pursuit of claims is an essential part of a caseworker’s duties.

Initial enquiries and prospects

There is an opportunity to establish dividend prospects from the Statement of Affairs and/or the VAT 167 Deregistration Enquiry Form.

If the prospects of receiving a dividend have not already been established the opportunity should be taken to enquire about dividend prospects when in contact with the IP about other matters.

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Dividend received

Prioritisation of ‘Own resources’

The UK’s membership of the European Union (EU) requires the UK to account for the European Communities’ Own Resources. ‘Own Resources’ is a term given to Customs duties, agricultural duties and levies on goods imported from non-European Union (EU) countries (see the first item in the table below). Revenue from Own Resources collected by HMRC is transferred to the EU via HM Treasury. Even when an ‘Own Resources’ debt is written off (including insolvency write-off) the UK may still be required to make the funds available to the EU if it has failed to take complete and timely recovery action or administrative error is involved. It is therefore imperative that dividend payments are allocated to ‘Own Resources’ debts first. When a dividend payment is received on a claim which includes Own Resources, the NIU/VAS must notify Finance in Worthing of the amount of the own resources element of the claim and the amount of dividend received. Finance Worthing will then allocate the dividend payment to clear the own resources element of the claim first and send details to the International Accounts Team in Finance, Southend.

Other cases (not involving own resources)

Money received in respect of Dividends when entire claim is paid in full.

These amounts will be notified via EF D-print as a non-appropriated credit which appears on file (usually after the case is de-registered) but does not correspond to any VAT return. Check the amount against the IY page figure - if it matches, a V907 should be completed to appropriate the credit to the pre-relevant (type 90) period.

Money received in respect of partial dividend

If a partial dividend is received then this should be accounted for at the point of receipt as Further Recovery after Write-Off (FRAWO).

Money received in respect of all Dividends for Group registrations or Partnership cases that are not on the Insolvency suite.

These amounts are to be entered on the front of the RAS under the appropriate category of the pre-relevant section. The credit will appear on the VAT account in the period notified. Because solvent members are jointly and severally liable for any debts which can be pursued by enforcement action, it is important to place these dividends on the VAT account.

Order in which debts should be satisfied

• Dividend payments should be allocated in the order set out in the table below. Within each category the oldest debts must be cleared first. It should be rare for a customer to have more than one or two debts in this list. If the insolvency practitioner enquires as to how the dividend payment has been allocated, you may tell him.

Where payment in full is received the VAT element of the dividend should be placed on the pre relevant account. (See INS12651).

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Receipts

A receipt for dividend may be given if requested by the Insolvency Practitioner.

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Receipts in advance of dividend

Occasionally an IP may request a “receipt” as a pre-condition of releasing the dividend payment. Before authorising the document, the receipt should be qualified, “it being understood that at the time of signing this document the sum referred to herein has not been paid”.