HMRC to become a preferred creditor – again
Back in 2018, the government announced in the budget a change in the way business insolvencies will be handled from 6 April 2020. From that date, HMRC will gain preferential treatment over non-preferential and floating charge holders such as banks. This will cover: VAT, PAYE income tax, student loan repayments, employee National Insurance Contributions (NICs) or construction industry scheme deductions.
With this change HMRC expect to reclaim the £185 million it loses per year paid by employees and customers to businesses which have then become insolvent, and not remitted the taxes.
Concerns have been raised that by moving lenders or banks further down the list to reclaim payments, appetite to lend may reduce and the terms imposed on lending will be less favourable. However it should also be noted that the money HMRC is expecting to raise from the new legislation is only a small slice of the £57 billion lent by banks to SME’s in the last 12 months to July 2018.
For further information on these changes and how they affect businesses, please contact Michaela Johns on 023 8046 1256.