Sunday, August 9, 2020

HMRC insolvency cash grab a “bad deal” for businesses, say R3 Midlands

Government plans, confirmed in the new (published 11/7/19) draft Finance Bill are a “bad deal” for UK businesses and the taxpayer, says the Midlands branch of insolvency and restructuring trade body R3.

The Government has announced that it is pushing ahead with proposals to prioritise the repayment of some tax debts in insolvencies from April 2020. The extra money which will be repaid to HMRC under these proposals will come out of funds which would otherwise have been paid to creditors including pension schemes, trade creditors, lenders, and employees.

The business community and the insolvency and restructuring profession have repeatedly warned the Government that its proposals are a threat to access to finance and a threat to business rescue.

R3 Midlands Chair Eddie Williams said: “While the Government has removed one damaging part of its original proposals – unproven tax penalty debts won’t be included in HMRC’s new priority claims – this is very much a case of the Government shooting first and asking questions later. That’s not a recipe for good policy.

“The Government should have gone much further in cutting back the scope of its proposals. Unlike the earlier, pre-2003 version of this policy, the size of the Government’s priority claim is uncapped, creating significant uncertainty in insolvencies for lenders, businesses, and others. A cap on the age of tax debt eligible for priority status would have been an obvious way to limit the downsides of the proposal. Ensuring that tax debts don’t take priority over pre-existing floating charges would have made these proposals much fairer, too.”

Mr Williams, who is also a partner at Grant Thornton in the East Midlands, continued: “The potential downsides of this policy are plain to see. More money back for HMRC after an insolvency means less money back for everyone else. This increases the risks of trading, lending and investing, and could harm access to finance, especially for SMEs experiencing distress. This means less money is available to fund business growth and business rescue and, in the long term, could mean less tax income for HMRC from rescued or growing businesses. It’s a self-defeating policy.

“The policy really doesn’t seem worth it. The Government is expecting a relatively small tax boost –under £195m a year, at most – and seems prepared to accept damage to access to finance and increased costs in insolvency to get it. The wider costs of this policy will outweigh the benefits. The Government must think again.”

A consultation on the Government’s proposals closed in May 2019. Following this consultation, the Government is now proposing that:

  • In insolvency procedures starting in or after April 2020, certain debts owed to HMRC, including PAYE, employee NICs, and VAT, will be repaid in priority to debts owed to floating charge holders and unsecured creditors. Currently, all HMRC debt is unsecured.
  • Following a consultation, the Government has decided that tax penalties willnot form part of HMRC’s preferential claim. However, the Government has rejected widespread feedback that there should be a cap on the age of tax debts eligible for preferential status and that the changes should only apply to tax debts arising and floating charges created after 6 April 2020

A message from the Editor:

Thank you for reading this story on our news site - please take a moment to read this important message:

As you know, our aim is to bring you, the reader, an editorially led news site and magazine but journalism costs money and we rely on advertising, print and digital revenues to help to support them.

With the Covid-19 lockdown having a major impact on our industry as a whole, the advertising revenues we normally receive, which helps us cover the cost of our journalists and this website, have been drastically affected.

As such we need your help. If you can support our news sites/magazines with either a small donation of even £1, or a subscription to our magazine, which costs just £33.60 per year, (inc p&P and mailed direct to your door) your generosity will help us weather the storm and continue in our quest to deliver quality journalism.

As a subscriber, you will have unlimited access to our web site and magazine. You'll also be offered VIP invitations to our events, preferential rates to all our awards and get access to exclusive newsletters and content.

Just click here to subscribe and in the meantime may I wish you the very best.






Latest news

Rowley Turton shortlisted at national awards for three years running

Leicester based Chartered Financial Planners, Rowley Turton, have been recognised as one of the UK’s best financial advisers by being shortlisted for ‘Financial Adviser...

Developers acquire key Nottingham city centre sites

Developers Peveril Securities and Sladen Estates, the team behind the landmark Unity Square scheme in Nottingham, have acquired a number of key buildings in...

Simple Marketing Consultancy celebrates 10 years in business

Simple Marketing Consultancy (SMC), the Nottingham-headquartered marketing services specialist, has recently celebrated its 10th anniversary. Founded on 10 August 2010 CIM qualified Chartered Marketer Bev...

How Salesforce Administrator Certification can help you get a better job?

A Salesforce Admin is a skilled professional who works with stakeholders to help them tailor the Salesforce platform's apps in accordance with their business...

Reunite at the 2020 East Midlands Bricks Awards

Presenting the ideal forum to celebrate success and establish new contacts, within a safe and secure environment, this year’s highly anticipated East Midlands Bricks...

Related news

Works set to commence in August for redevelopment of Skegness Industrial Estate

Midlands-contractor G F Tomlinson is due to start highway infrastructure works this August as part of the £2.4million re-development of a mixed-use business park site in...

Rowley Turton shortlisted at national awards for three years running

Leicester based Chartered Financial Planners, Rowley Turton, have been recognised as one of the UK’s best financial advisers by being shortlisted for ‘Financial Adviser...

Developers acquire key Nottingham city centre sites

Developers Peveril Securities and Sladen Estates, the team behind the landmark Unity Square scheme in Nottingham, have acquired a number of key buildings in...

Simple Marketing Consultancy celebrates 10 years in business

Simple Marketing Consultancy (SMC), the Nottingham-headquartered marketing services specialist, has recently celebrated its 10th anniversary. Founded on 10 August 2010 CIM qualified Chartered Marketer Bev...

By continuing to use the site, you agree to the use of cookies. more information

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.

Close