A new fee structure for insolvency cases that would come in next June has been proposed by Scotland's Accountant in Bankruptcy (AiB) to cover a projected funding deficit.

Earlier proposals put forward in March this year were withdrawn after a committee of MSPs raised concerns including over their effect on the amount of any potential reversion to a debtor where a property had been sold, and whether the audit fee on cases managed by private trustees should be capped.

Under the present scheme, although the AiB recorded small surpluses in the two years prior to 2016-17, in that year it needed a financial top-up from the Scottish Government and its projected deficits for 2018-19 and 2019-20 are £4.2m and £3m respectively. This is because of the recent extension to four years of the period during which a debtor should make contributions from income towards their debts, resulting in a delay in realising income from cases awarded in 2015-16 onwards.

While AiB recognises that in the short term most of the deficit will require to be funded by the public purse, it wants to move to "a more sustainable pattern of future income", and look to raise about £1m a year more by the time the fees are fully established.

To achieve this it proposes to:

  • drop plans to cap the audit fee;
  • drop plans to introduce the charging of interest for late payment of debts to the Agency (a further matter of concern in the Parliament);
  • make no changes to the current percentages taken from assets realised; but
  • increase the flat rate fee charged to each case where AiB is trustee by a further £200, so that the new fee would be £1700.

"The practical impact of these changes, compared to our earlier proposals, is that slightly fewer cases will produce any dividend to creditors, but those cases that continue to produce dividends, will tend to produce slightly larger ones", the paper states.

It adds that the number of cases producing slightly larger dividends will be relatively small – in 2015-16, there were only 22 cases in which any reversion was available for the debtor.

AiB does not expect the proposals to impact on creditor behaviour.

Click here to view the consultation. The deadline for responses is 12 March 2018.