The Compendium

A Comprehensive Companion for All in the Insolvency and Restructuring Profession

Connected Person

A connected person is defined within section 249 Insolvency Act 1986 as:

  1. A director or shadow director; or
  2. An associate. This is defined in section 435 as a person connected to a director of a company by law or blood, an employee or a company controlled by a director (this is, one in which the director has more than 50 per cent of voting shares).

Examples of an ‘associate’ are a mother-in-law, a spouse, a niece, brother, civil partner, grandfather and sister-in-law. A cousin is specifically excluded from the definition.

An associate will not be a fiancée, a cohabitant and a very good friend (as there is no blood or formal legal bond with them).

[See ‘Insolvency Act’ and ‘Director’.]

Construction Industry Scheme

Under the Construction Industry Scheme (CIS) contractors deduct money from a subcontractor’s payments and pass it to HMRC. This acts in a way very like ‘PAYE’.

The deductions count as advance payments towards the subcontractor’s tax and National Insurance.

Contractors must register for the scheme. Subcontractors do not have to register, but deductions are taken from their payments at a higher rate if they are not registered.

HMRC can claim as a secondary preferential creditor for unpaid amounts of CIS.

[See ‘HMRC’, Preferential’ and ‘PAYE’.]