The HMRC Crown Preference Returns is about the return of the preferential creditor status enjoyed by the Crown.
What is the HMRC Crown Preference?
The Crown Preference is the preferential status that now, from 1 December 2020, is enjoyed by HMRC when there are sufficient funds (after the costs and expenses of an insolvent estate) to be distributed to creditors in any insolvency.
Certain creditors such as elements of employee claims have a preferential status ahead of the unsecured creditor claims.
Almost 20 years ago the Enterprise Act 2002 abolished the then preferential status of the Crown.
The Return of the Previously Enjoyed Crown Preference
We now have it back in a revised fashion. Previously there was no limit. Now certain of these HMRC debts rank behind employee preferential rights but ahead of floating charge debts and unsecured claims by virtue of Section 98 of the Finance Act 2020 and The Insolvency Act 1986 (HMRC Debts: Priority on Insolvency) Regulations 2020.
This does not apply to all taxes but it does apply to taxes in effect that the taxpayer collects for HMRC such as VAT, PAYE and National Insurance Contributions.
Taxes that HMRC collects directly such as corporation tax and employer national insurance contributions do not become preferential.
Impact of the HMRC Crown Preference Return
This is likely to have some considerable impact on the business community by making borrowing potentially more expensive. There is likely to be some added risk to a lender in that any security they may acquire could be less likely to have value on insolvency.
From the point of view of the borrower, it is envisaged that finance will be less easily obtained.
The forthcoming anticipated collection by HMRC of its debts that may have been held back by virtue of the Covid-19 legislative restrictions, on winding up companies, may see a widespread impact arising from The Crown Preference Returns. HMRC may be more robust in the pursuit of its unpaid taxes that it might now hope to ascertain out of insolvency.
If HMRC Crown Preference Returns affects you and would like advice on its implications please call to discuss how Oliver Elliot can help. Call us on 0203 925 3613, or email us at contact@oliverelliot.co.uk.
What Next?
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If you have any questions in relation to HMRC Crown Preference Returns then contact us as soon as possible for advice. Oliver Elliot offers a fresh approach to insolvency and the liquidation of a company by offering specialist advice and services across a wide range of insolvency procedures.
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Disclaimer: HMRC Crown Preference Returns
This page is not legal advice and is not to be relied upon as such. This article HMRC Crown Preference Returns is provided for information purposes only. You should take independent advice on the facts of your case. No liability is accepted for reliance upon this post.
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