For those people who know what Crown Preference is then I guess you'll already know what this article will mean.
However, there are many that will not be aware that as of December 1st 2020, the UK Tax authorities (HMRC) will move up the creditor hierarchy in (specifically) English insolvency proceedings. As a result of the change, HMRC will rank ahead of floating charge holders and unsecured creditor claims.
This was due to commence at the beginning of the current tax year, but has been delayed until December 1st 2020, and is a return to the how things were before 2002 when the Enterprise Act was introduced.
Before 2002 HMRC were granted preferential status and needed to be paid in full before any distribution to any floating charge-holder, pension fund unsecured creditor. Post 2002 and up until December 1st the pari passu principle applied which meant that all creditors (other than those with a fixed charge) get any proceeds from an insolvency process shared rateably. This means that each creditor is entitled to a share of the proceeds corresponding to the percentage of debt owed, by the company to its creditors. Now I might be losing some people here…Is there anyone still there? So why the need for me to tell you this? Well in these uncertain times this change in legislation has an impact on many people. I want to focus on three…
Peter Cromarty is Managing Director of Corporate and Commercial Business Solutions Ltd, a commercial finance brokerage and business consultancy. M: 07715 409386 E: peter@ccbsg.co.uk W:www.ccbsg.co.uk
