In Focus Collections
Chancellor warned on damage from Treasury cash grab
Senior industry trade bodies have written to the government to protest against plans to prioritise repayments to HMRC over repayments to other creditors
Duncan Swift President, R3
Last month, leading business groups and insolvency experts wrote to the chancellor to warn that plans to prioritise repayments to HMRC over repayments to other creditors in insolvencies will have serious consequences for the UK economy. Under legislation included in the draft
Finance Bill, the government is planning that, from 6 April 2020, certain tax debts owed by an insolvent company – including VAT, PAYE, and employee NICs – will be repaid to HMRC in priority to debts owed to floating-charge holders and unsecured creditors, including a company’s pension scheme and its suppliers. Currently, HMRC is repaid alongside
other unsecured creditors. The change was announced, with no prior consultation, at the 2018 Budget.
Signatories The letter has been signed by representatives from: l R3, the insolvency and restructuring trade association. l The Alternative Credit Council. l The Association of Chartered Certified Accountants. l The British Private Equity and Venture Capital Association. l The British Property Federation. l The Chartered Institute of Credit Management. l The City of London Law Society. l The Institute of Chartered Accountants in England and Wales. l The Institute of Chartered Accountants of Scotland. l The Insolvency Practitioners Association.
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l Professor Peter Walton of the University of Wolverhampton.
Business rescue The signatories say that the proposals will make it harder to rescue businesses, will limit access to finance throughout the economy, will increase the impact of insolvencies on other businesses, and may even undermine government tax receipts. While we understand that the government
wishes to increase the value of taxes repaid in the event of insolvency, there is a serious risk that the wider costs of the government’s approach will outweigh any expected benefit. This proposed policy would reverse
successive governments’ attempts to encourage a culture of business rescue in the UK, and would undermine the government’s recent work to strengthen the UK’s insolvency and restructuring framework.
Significant negative impact The proposal may have a significant and negative impact on access to finance in the UK, and will increase the impact of corporate insolvencies on pension schemes, trade creditors, consumers, and the wider business community. Government projections claim the move,
alongside other changes, could raise £195m a year, at most, in tax income, but the business groups are warning this sum could be less than the amount that will be lost in taxes from businesses which can no longer be rescued, and as a result of restricted access to finance throughout the economy. The government has not properly
considered the wider impact its proposals
www.CCRMagazine.com October 2019
The signatories say that the proposals will make it harder to rescue businesses, will limit access to finance throughout the economy, will increase the impact of insolvencies on other businesses, and may even undermine government tax receipts. While we understand that the government wishes to increase the value of taxes repaid in the event of insolvency, there is a serious risk that the wider costs of the government’s approach will outweigh any expected benefit
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