Today (Dec 1) sees the start of new insolvency rules putting the taxman higher up the pecking order in sharing out the remains of insolvent companies.
The change means that HMRC becomes a priority creditor for tax debts which are paid in good faith by employees and customers and held by the company on their behalf at the point when it becomes insolvent.
Previously, HMRC was an unsecured creditor in respect of these debts, with no preference over others such as trade or employee creditors.
This reform will only apply to taxes collected and held by businesses on behalf of other taxpayers. The included charges are:
- VAT
- PAYE Income Tax
- employee National Insurance contributions
- student loan deductions
- Construction Industry Scheme deductions
The rules will remain unchanged for taxes owed by businesses themselves, such as:
- Corporation Tax
- employer National Insurance contributions
The move was first due to come into effect in April but deferred until today in response to the Covid pandemic.
