HMRC moves up creditor hierarchy.
Despite concerns raised from many businesses, legislation will be introduced in Finance Bill 2020 to amend the relevant section of the Insolvency Act, Bankruptcy (Scotland) Act 2016 and the Insolvency (Northern Ireland) Order to move HMRC up the creditor hierarchy for the distribution of assets in the event of insolvency.
It will make HMRC a secondary preferential creditor in respect of certain tax debts held by a business (this includes individuals and partnerships) on behalf of their customers and employees.
This reform will only apply to taxes collected and held by businesses on behalf of other taxpayers (VAT, PAYE income tax, employee national insurance contributions, student loan deductions and construction industry scheme deductions).
The rules will remain unchanged for taxes owed by businesses themselves, such as corporation tax and employer national insurance contributions.
The legislation will be introduced in Finance Bill 2020 and will take effect from 1 December 2020.
Article from ACCA In Practice