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From 1 December 2020, HMRC will be a secondary preferential creditor in insolvency proceedings in relation to VAT, PAYE income tax, employee National Insurance, student loan deductions, and construction industry scheme deductions. As a result, HMRC debts will be repaid before amounts owed to secured creditors with a floating charge and other non-preferential creditors.
The appetite for lending may be reduced because HMRC’s new status will lessen the chances of lenders being repaid if a business becomes insolvent, according to Moore.
Chris Tate, director at the firm, said: ‘The reinstatement of HMRC as a preferential creditor is ill-timed – many businesses are already struggling to survive as a result of lockdown measures. Both business funders and suppliers are likely to be unwilling to extend credit to businesses, especially struggling ones, if they think that HMRC will potentially receive most of the funds realised in an insolvency. If suppliers stop supporting struggling businesses, then more jobs will be lost.’
