Budget change on insolvency to bring in £600m
Shepherd + Wedderburn partner Fiona McKerrell explains how a change in the Budget on insolvency means HMRC will be pushed up the order of priority when a company goes under. The reform “will only apply to taxes collected and held by businesses on behalf of other tax payers” and will not affect other taxes “owed by businesses themselves”. From 6 April 2020, HMRC will remain below other preferential creditors but above floating charge holders and unsecured creditors A separate change will make directors and others involved in tax avoidance, evasion or “phoenixism” jointly and severally liable for company tax liabilities where there is a risk the company may deliberately enter insolvency. The combined changes are expected to bring in over £600m for the Revenue, peaking at £195m a year.
We spoke to John Cullen of Top Liquidation specialists Menzies who added:
“This does take us back in time 15 years. The new preferential regime will apply to taxes such as VAT, PAYE and CIS and may, in my opinion, make it significantly harder for businesses to get funding from banks unless they have property or big assets and debtors as fixed security. It will also mean unsecured creditors will be even further down the pecking order in insolvent estates.”
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