Crown creditor preference under insolvencies from 1 December

Nov 30, 2020

Readers are reminded that for an insolvency commencing on or after tomorrow 1 December 2020, HMRC will be a secondary preferential creditor in respect of certain tax debt. The NI Tax Committee was not supportive of this change in its response to the consultation which preceded this legislation. In addition, the Institute, in its Next Financial Year position paper recommended that this measure be delayed for two years until 2022 because of the economic impact of the pandemic.

Preferential debts are paid after fixed charges and the expenses of the insolvency practitioner, but before the holders of floating charges and all other unsecured creditors.

This change impacts on the following fiduciary taxes:-

  • VAT;
  • PAYE Income Tax;
  • employee National Insurance contributions;
  • Student loan deductions; and
  • Construction Industry Scheme deductions

The rules remain unchanged for taxes owed by businesses themselves such as corporation tax and employer National Insurance contributions.