HMRC has published a new policy paper HMRC
as a preferential creditor to explain how taxes paid by a company’s
employees and customers are protected in insolvency procedures commencing after
1 December 2020.
From that date, HMRC is a secondary preferential creditor in
insolvency proceedings in relation to VAT, PAYE income tax, employee NICs,
student loan deductions, and construction industry scheme deductions. This
means that these debts are paid to HMRC before amounts owed to secured creditors
with a floating charge and other non-preferential creditors – protecting
revenue for the exchequer, rather than those taxes being used to pay off debts
owed to other creditors.
The reintroduction of HMRC’s status as a preferential creditor
could, however, have a ‘devastating impact on businesses and their ability to
obtain finance’, says accountancy firm Moore: ‘It’s likely the appetite for
many kinds of lending will be reduced as HMRC’s new status will lessen the
chances of lenders being repaid out of the pot of remaining asset recoveries,
if the business becomes insolvent. If lenders raise their interest rates to
make up for the increased risk, then many businesses will have to cut their
expansion plans.’
Chris Tate, director at Moore, said: ‘The reinstatement of HMRC
as a preferential creditor is ill-timed – many businesses are already
struggling to survive as a result of lockdown measures. The last thing they
need is for rescue funding being harder to come by.’
HMRC has published a new policy paper HMRC
as a preferential creditor to explain how taxes paid by a company’s
employees and customers are protected in insolvency procedures commencing after
1 December 2020.
From that date, HMRC is a secondary preferential creditor in
insolvency proceedings in relation to VAT, PAYE income tax, employee NICs,
student loan deductions, and construction industry scheme deductions. This
means that these debts are paid to HMRC before amounts owed to secured creditors
with a floating charge and other non-preferential creditors – protecting
revenue for the exchequer, rather than those taxes being used to pay off debts
owed to other creditors.
The reintroduction of HMRC’s status as a preferential creditor
could, however, have a ‘devastating impact on businesses and their ability to
obtain finance’, says accountancy firm Moore: ‘It’s likely the appetite for
many kinds of lending will be reduced as HMRC’s new status will lessen the
chances of lenders being repaid out of the pot of remaining asset recoveries,
if the business becomes insolvent. If lenders raise their interest rates to
make up for the increased risk, then many businesses will have to cut their
expansion plans.’
Chris Tate, director at Moore, said: ‘The reinstatement of HMRC
as a preferential creditor is ill-timed – many businesses are already
struggling to survive as a result of lockdown measures. The last thing they
need is for rescue funding being harder to come by.’
