The Compendium

If the partners believe in the fundamental viability of the business and are determined to fight for its survival, a PVA can be a powerful tool or framework for the restructuring of the business. In order for such an Arrangement to succeed, all of the partners must be prepared to prove the viability of the business and their personal estates must be solvent prior to the PVA being proposed.

Using the vehicle of a PVA can allow the partners of a business time to sell some assets for better value than a Liquidator or Bankruptcy Trustee can obtain.

[See ‘Individual Voluntary Arrangement’ and ‘IVA’.]

Pay As You Earn

If a person is an employee of a business they normally pay tax through Pay As You Earn (PAYE).

Every time their salary is paid, their employer deducts Income Tax and National Insurance Contribution (NIC) and pays the amount deducted direct to HMRC on their behalf. A ‘tax code’ will tell the employer how much they must deduct (which they will then pay direct to the Revenue). Student loans may also be repaid in this way. PAYE is generally split into equal payments over the year.

The alternative way to pay income tax is self-assessment, whereby individuals complete a self-assessment tax return and normally pay tax once or twice a year.

[See ‘HMRC’.]

Pension Protection Fund

The Pension Protection Fund (PPF) pays compensation to members of eligible defined benefit pension schemes, when there is a qualifying insolvency event (going into Administration or Liquidation) in relation to the employer and where there are insufficient assets in the pension scheme to cover Pension Protection Fund levels of compensation.

The PPF was created by the Pensions Act 2004 which recognised the ‘moral hazard’ risk that employers might try and ‘dump’ schemes into the Fund. The Fund work closely with The Pensions Regulator (TPR) to ensure this does not happen and that any scheme that does enter the PPF is the subject of a bona fide (genuine, in good faith) employer insolvency.