Following the Enterprise Act 2002, the preferential status which
HMRC had enjoyed in an insolvency was abolished, rendering HMRC the
same as any other unsecured creditor. The effect of this was to
swell the pot of assets available to be applied to all unsecured
creditor claims.
Philip Hammond announced in Monday's budget that HMRC's
preferential status is to be restored. What does this mean for HMRC
and unsecured creditors?
The Budget provided that:
"From 6 April 2020, when a business enters insolvency,
more of the taxes paid in good faith by its employees and
customers, and temporarily held in trust by the business, will go
to fund public services rather than being distributed to other
creditors. This reform will only apply to taxes collected and held
by businesses on behalf of other taxpayers (VAT, PAYE Income Tax,
employee NICs, and Construction Industry Scheme deductions). The
rules will remain unchanged for taxes owed by businesses
themselves, such as
