Connect with us

Hi, what are you looking for?

Investing

Return of HMRC preferential status risks company rescues

HMRC

The return of HM Revenue & Customs’ preferential status when companies go bust will “scupper” a business rescue process that helped to save thousands of jobs during the Covid-19 pandemic, insolvency experts have warned.

Company voluntary arrangements are expected to be used less often after the partial return of “crown preference” yesterday, whereby certain tax debts move up the repayment queue in insolvency cases. VAT and payroll taxes now have priority over “floating charge” creditors and unsecured creditors, such as suppliers and pension funds. A company with large tax debts is now less likely to secure a CVA, since returns to unsecured creditors may be too low for them to agree to the process.

Tim Symes, a specialist in insolvency at Stewarts, a law firm, said that the taxman could insist on being paid in full in a proposed CVA, meaning that the plan “could instantly become dead in the water. HMRC will have gouged out such a large share from available assets that it won’t be worth unsecured creditors supporting it.

“If HMRC ignore it, then the whole point of a CVA — being to get a breathing space from creditors — is defeated.”

Damian Webb, a partner at RSM Restructuring Advisory, also warned that the policy would “severely constrain restructuring options”.

Mr Symes added that the government should heed calls from R3, the insolvency trade body, which has asked for crown preference to be suspended.

The Enterprise Act 2002 ended HMRC’s original preferential status. Experts said its revival had been driving insolvencies in recent weeks as lenders sought to have processes under way before the new rules came into force.

Read more:
Return of HMRC preferential status risks company rescues

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Get the daily email that makes reading the news actually enjoyable. Stay informed and entertained, for free.
Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!

Latest

Economy

THE INTERNATIONAL Monetary Fund (IMF) said macroeconomic policy support and reforms may help diminish the pandemic’s scarring effect on the Philippine economy. “Some economic...

Economy

The country’s retirement income system is based on a small basic pension and an earnings-related Social Security System. — PHILIPPINE STAR/ MICHAEL VARCAS THE...

Economy

Global oil prices have spiked in recent weeks due to lack of supply and strong demand as more countries reopened. — PHILIPPINE STAR/ MICHAEL...

Economy

A Filipino uses a mobile phone in Parañaque, Aug. 7, 2018. — REUTERS/ERIK DE CASTRO DIGITAL TRANSFORMATION is estimated to create up to P5...

Economy

By Angelica Y. Yang, Reporter SN Aboitiz Power (SNAP) said the global health emergency had pushed back the timeline of its planned Alimit hydropower...

Economy

AYALA-LED AC Energy Corp. is moving to fully acquire ownership of renewable energy (RE) platform UPCAC Renewables Australia, after announcing that its management has...

You May Also Like

Investing

Having a good Instagram marketing agency to back up your Instagram account is an absolute must going into the new year. With competition stronger...

Economy

Ivermectin, an existing drug against parasites including head lice, has had a checkered history when it comes to treating COVID-19. The bulk of studies...

Investing

As a traditionally rigid insurance industry becomes bogged down by antiquated processes and operations, a handful of industry leaders are seeking to shake things...

Economy

Pfizer Inc on Wednesday raised its 2021 sales forecast for its COVID-19 vaccine by 29% to $33.5 billion, and said it believes people will...

Disclaimer: SmartRetirementReport.com, its managers, its employees, and assigns (collectively "The Company") do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

Copyright © 2021 SmartRetirementReport. All Rights Reserved.

Get the daily email that makes reading the news actually enjoyable. Stay informed and entertained, for free.



Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!