Although he never filed for bankruptcy, which very smart American President left a $107,000 debt for his heirs?
HMR&C set to regain “priority” over certain other creditors in insolvency
In a briefing paper issued by HM Treasury on 29th October 2018, following the Budget, it was announced that from April 2020 HMR&C will have greater priority to recover taxes paid by employees and customers. This will include VAT, PAYE, NIC and CIS deductions. The rules remain unchanged for other taxes owed by the business itself, such as Corporation Tax and employers’ National Insurance contributions, and HMR&C will remain below other preferential creditors such as the Redundancy Payments Service. However, HMR&C will rank above non-preferential unsecured creditors.
HMR&C lost their previous preferential creditor status with effect from 15th September 2003 following implementation of the Enterprise Act 2002.
This measure is added to a previously announced move to tackle tax abuse through insolvency. This will come into force following Royal Assent of the Finance Bill 2019-20, and make directors and others involved in tax avoidance, evasion or phoenixism, where the assets of a failed business are sold (in some cases to its existing directors), jointly and severally liable for company tax liabilities where there is a risk the company may have deliberately entered insolvency.
Whilst measures to protect the “public purse” are welcome, we believe that care will need to be taken in decision making and consistency of approach.
The responses from other stakeholders have yet to be seen but it will be interesting to hear from those involved in creditor services, debt collection and litigation as they find themselves pushed further down the pecking order in the event of an insolvency. How will this impact on business credit if suppliers know that achieving a return from a problem debt in an insolvency process maybe less likely or at a diminished level than would have been the case prior to the proposed changes.
Also, will there be any reaction from lenders with changes of policy when it comes to providing and monitoring finance to businesses? Lenders relying upon their floating charge security will find their returns from an insolvency process reducing as HMR&C absorb the funds before they become payable to the lender.
Full details about the changes are yet to come but it will certainly be a topic that receives plenty of attention in the months ahead.
Andrew Bailey is Insolvency Advisor of the Year
We are very proud to announce that Andrew Bailey, one of our licensed insolvency practitioners, and a partner of our firm has won the M&A Insolvency Advisor of the Year award. Andrew has worked in the insolvency sector for over 15 years providing advice to both businesses and individual clients. Some of his most notable cases include the restructuring of 2 of the largest cosmetic surgery groups in the UK as well as advisory cases involving high street names.