Consultation response to Statutory Debt Repayment Plan

HM Treasury (HMT) has released its response to the May 2022 consultation ‘Statutory Debt Repayment Plan’. Respondents raised significant challenges and concerns, both in the design of the proposals and the timing of their implementation. 

The Statutory Debt Repayment Plan (SDRP) was intended to be a new statutory debt solution focussed on the repayment of debts, rather than debt relief.

The proposals stated that a broad range of debts would be included within the scope of the plan, including debts owed to the government and to creditors outside of financial services. The SDRP aimed to protect debtors from enforcement action, creditor contact and interest, fees and charges on their debts while they repay them.

Over 80 responses were received: 

• Most respondents agreed there is a need for a debt solution that provides statutory protections to people who can afford to repay their debt.
• A majority also agreed that the current SDRP proposal would require significant changes to improve on existing debt solutions.
• Most respondents disagreed with the proposed approach to the funding of the scheme.
  • Debt advice stakeholders universally objected to the funding model, arguing it would not cover the ongoing costs to them of operating the scheme. Many suggested they would not offer SDRPs at all.
• Two-thirds of creditors who gave a view thought the SDRP’s protections were too generous.
• Many respondents questioned whether SDRP is the right intervention to prioritise at this time.
• Over half of respondents who gave a view felt that, without total clarity on how the Insolvency Service’s electronic service would work, an 18-month implementation period between laying regulations and the scheme commencing would be too short for them to comply.
• Many stakeholders who expressed a view disagreed with the proposed grounds for revoking a plan.
  
  • Debt advice stakeholders questioned the revoking of a plan where payments were missed, or where a debtor had failed to respond to previous notices to comply with the scheme, as there may be legitimate reasons for the debtor’s conduct.

In light of the feedback given, the government has determined that it will not proceed to lay regulations implementing the SDRP this year.

Further decisions on the future of the SDRP will be based on the outcomes of the government’s review of the personal insolvency framework, led by the Insolvency Service.

Useful guides on this topic

Consultation on Statutory Debt Repayment Plan
HM Treasury has published, 'Statutory Debt Repayment Plan: Consultation', which looks at a new statutory debt solution focused on repayment of debt, rather than debt relief.

Tax debts and insolvency
This guide summarises the treatment of tax debts to HMRC in insolvency cases.

Bad debts: VAT recovery
When can you recover VAT on a bad debt? How much VAT is payable to HMRC or recoverable from HMRC when only part of an invoice is paid?

External link

Consultation outcome: Statutory Debt Repayment Plan: Consultation