In the April budget the Chancellor announced that from 6 April 2020 it proposes that HMRC will once again benefit from a Crown preference.
This means that in an insolvency, HMRC would rank ahead of floating charge holders and unsecured creditors. The taxes collected by the insolvent company from customers and employees on HMRC’s behalf, such as VAT, PAYE income tax and employees’ national insurance contributions.
This is a partial introduction of the Crown preference that was abolished by the Enterprise Act in 2002 when a package of reforms was introduced which aimed to encourage HMRC to look to support rescue options for viable companies rather than winding them up.
There are concerns that this will undermine the current rescue culture and limit the options for viable companies that are struggling.