The Return of Crown Preference

Posted by amandaireland - September 2, 2020 3:10 pm The Return of Crown Preference

There has been talk for some time about the return of Crown Preference, and following Royal Assent being given to the Finance Act 2020 on 22nd July 2020, we now know that with effect from 1 December 2020 HMRC will become a secondary preferential creditor in insolvencies.

This means that HMRC will rank behind the preferential element of employees claims but ahead of all unsecured creditors, but only in respect of monies deducted from a payment to another person which was intended then to be paid to the Commissioners.

So for example VAT, PAYE and employee NIC’s will be secondary preferential claims in insolvencies, with no limit to the amount of the claim, for any case where the relevant date is on or after 1st December 2020.  Other tax debts, such as employers NICs and Corporation Tax will remain as unsecured debts.