The Foskett Panel

1. As explained in our detailed guidance for Customers who have been made bankrupt here, for these Customers it is likely that a Panel Award will be based on one of two conclusions of the Panel (on the balance of probabilities):
   • that the Customer was made bankrupt as a consequence of the IAR Fraud; or
   • that the Customer would have been made bankrupt irrespective of the IAR Fraud.
2. We explain the likely tax impact on any Panel Award under each scenario (note that tax on Fixed Sum Awards and the implications if you have been made bankrupt are covered separately here):

Customers made bankrupt as a consequence of the Fraud

3. In this scenario the Panel Award is likely to include an award in respect of amounts due to creditors by the Trustee in Bankruptcy (or Official Receiver) in order to have the bankruptcy annulled (the “Creditor Payment”). It is expected that there will be a tripartite agreement between LBG, the Customer, and the Trustee in Bankruptcy (or Official Receiver) concerning the payment of this amount. The amount awarded in respect of the Creditor Payment, together with any increase in that award to cover the assumed tax due on it, will be paid directly to the Trustee in Bankruptcy (or Official Receiver).
4. The Customer may have self-assessment filing obligations in respect of amounts paid directly to the Trustee in Bankruptcy (or Official Receiver).
5. In line with the likely tripartite agreement between LBG, the Customer, and the Trustee in Bankruptcy (or Official Receiver), it is expected that any amount of a Panel Award that is not in respect of the Creditor Payment (referred to as the ‘Personal Payment’ in the Panel’s guidance for bankrupt customers) will be paid, together with any increase in that award to cover the tax assumed to be due on (the Non-Compensatory Interest Part of) it directly to the Customer. This part of the award will be equivalent for tax purposes to the Panel Award for a non-bankrupt Customer (see explanation on the taxation of Panel Awards here).
6. It should be highlighted that, as with other Panel Awards, the Panel will be required to interpret the HMRC Guidelines and assess how they should be applied in each Customer’s case. It is impossible for the Panel to eliminate uncertainties over the proper tax treatment of awards of guarantee how HMRC may exercise any discretion it is given, given this is outside of the Panel’s control.

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Customers made bankrupt irrespective of the Fraud

7. In cases where the Panel are unable to conclude that the IAR Fraud probably caused the bankruptcy, it is likely that any Panel Award, together with any increase in that award to cover any tax due on (the Non-Compensatory Interest Rate part of) it will be paid to the Trustee in Bankruptcy (or Official Receiver), with any surplus being distributed to the Customer by the Trustee in Bankruptcy (or Official Receiver).
8. Given the specific complexities of any Customers in this situation it is expected that bespoke guidance on the tax will need to be provided on a case-by-case basis. Funding is available for professional fees to assist Customers as explained here.

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