Search our news, events & opinions

30 November 2020 0 Comments
Posted in Financial Services, Opinion

HMRC gets podium position

Author headshot image Posted by , Senior Associate

The Finance Act 2020 will result in HMRC salvaging its status as a preferential creditor for insolvencies that commence on or after 1 December 2020.


3030As matters currently stand, aside from fixed charge creditors, the Financial Services Compensation Scheme (FSCS) and employees are the only preferential creditors in an insolvency. That position is due to change next month when HMRC will become a secondary preferential creditor in relation to outstanding taxes, such as PAYE, employee NICs, VAT and CIS deductions.

As soon as HMRC moves up the rankings, it will result in unsecured creditors missing out on funds that would otherwise have been distributed equally amongst them. It will also mean that HMRC’s claims in respect of the aforementioned taxes will rank above secured creditors who hold floating charges, such as financial institutions. Consequently, the value of security available for lenders will be impacted and any loans that fund floating charge assets could lose their security value.

It will become imperative for lenders to conduct extensive due diligence in relation to the tax position of prospective borrowers and to ensure that the position is closely monitored. Lenders will need to insist that borrowers keep them updated on any debts owed to HMRC on a more regular basis. It would also be advisable to consider whether or not it would be appropriate to supplement the security position or whether a fixed charge security would also be suitable.

Contact us now to find out how our lawyers can help you:

0800 923 2073     Email

Leave a comment

Thank you for choosing to leave a comment. Please keep in mind that comments are moderated and please do not use a spammy keyword or a domain as your name or it will be deleted.




Financial Services

Our Financial Services lawyers understand your sector and are on hand to help.

Learn more

Senior Associate

T: 020 7842 1415 (DDI)

Search our news, events & opinions