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The resurgence of crown preference: the dog in the manger

Are we seeing a slow return to Crown preference (including for corporation tax) by the back door, asks Eloise Walker (Pinsent Masons).

Recent legislative change

During Covid a legislative change snuck onto the statute books.

Ignoring the protestations of insolvency practitioners  FA 2020 brought back Crown preference. At first the changes did not seem like that big a deal. On an insolvency HMRC became a secondary preferential creditor but only for certain specific taxes usually collected by companies for payment to HMRC: taxes like PAYE some NICs and crucially as we will see below VAT. Taxes owed by an insolvent company itself (the key one being corporation tax) were unaffected.

The change did attract a bit of criticism but it was mostly confined to querying the future accessibility of floating charge finance without increasing excessive lending costs because this change (coupled with an increase...

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