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.

At a glance

This consultation on the Statutory Debt Repayment Plan (SDRP) sets out the policy development that has taken place since earlier Government consultations in 2019. It seeks stakeholder views on three broad areas:

  • The draft regulations that are necessary to implement the SDRP.
  • Questions on outstanding policy issues and operational considerations.
  • A consultation stage draft impact assessment.

The consultation is the latest step in a 2017 Conservative Party manifesto commitment to introduce a ‘breathing space’ scheme and a statutory debt repayment plan for those in England and Wales with problem debts. It consulted on aspects of the SDRP in 2018-19, and published a response to that consultation in June 2019, setting out a basic blueprint for the scheme.

Under the proposals, debt breathing space will only be accessible via a professional, FCA regulated debt advice or a local authority. Eligible debtors will benefit from a 'breathing space' period during which almost all creditor enforcement action must be suspended while the debtor takes specialist debt advice.

It is worth noting that the consultation document differs from the draft legislation as the former does not mention tax debts. The draft legislation however includes Crown debt, including tax and national insurance as qualifying debt. These debts fall into a category called ‘ongoing liabilities’ which can be included in a plan. Even where this is the case, debtors must meet their ongoing liabilities as they fall due during the plan to remain eligible.

 A qualifying debt includes:

  • Any amount which a debtor is liable to pay under or in relation to:
    • An order or warrant for possession of the debtor’s place of residence or business.
    • A court judgment.
    • A controlled goods agreement.
  • Any debt owed or liability payable to the Crown.
  • Any debt or liability other than an ongoing liability which, at the date of the application for a plan, was
    • A future debt.
    • A contingent debt.

Certain debts are to be treated as priority debts. The Government proposes an alternative mechanism for determining the allocation of payments whereby 30% of a debtor’s payment (after the 10% administration fee has been deducted) be split pro-rata between priority debts based on their size, with the remaining 70% then split pro-rata between all debts, including those that are priority. 

In particular, the list of priority debts will include:

  • Rent or mortgage arrears on the debtor’s primary residence.
  • Debt owed to central or local government (Crown debt).
  • Debt in relation to the supply of gas or electricity.
  • Hire-purchase debt.

The SDRP regulations will apply in England and Wales, while Scotland already has its own debt respite scheme, the Debt Arrangement Scheme. Northern Ireland is considering its approach to a devolved debt respite scheme.

Useful guides on this topic

Tax debts and insolvency
This guide looks at 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?

Breathing space scheme: consultation on a policy proposal
HM Treasury has published its policy conclusions on proposals for a ‘Breathing space scheme’ for individuals suffering from problem debt together with proposals for a statutory debt repayment plan.

External links

Draft Legislation: The Debt Respite Scheme (Statutory Debt Repayment Plan etc.) (England and Wales) Regulations 2022

Statutory Debt Repayment Plan: Consultation