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ARTICLE · 19 JULY 2019

HMRC's Preferential Status In Insolvencies – Five Key Points

Shepherd and Wedderburn
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Despite significant concerns raised as to the impact on lending and on recoveries for unsecured creditors in insolvency, including from lenders and R3, the trade body for insolvency professionals...

United KingdomInsolvency/Bankruptcy/Re-Structuring
Allana Sweeney
Allana Sweeney
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Despite significant concerns raised as to the impact on lending and on recoveries for unsecured creditors in insolvency, including from lenders and R3, the trade body for insolvency professionals, it has been confirmed that HM Revenue and Customs' position as a preferential creditor will be resurrected with effect from 6 April 2020.

Currently, all tax debts owed to HM Revenue and Customs (HMRC) are unsecured. Under the proposed legislation, HMRC's priority claim on tax debts would be uncapped, and resurrection of its preferential creditor status is expected to raise c. £195 million annually.

The draft legislation as contained in the Finance Bill confirms:

  1. The preferential status is limited to VAT and certain deductions namely PAYE, employee National Insurance Contributions (NIC) and Construction Industry Scheme deductions.

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