Budget 2018: HMRC getting preferred creditor status will hit unsecured creditors and employees

Publications that covered this story include The Times and Accountancy Daily on 30 October 2018.

Following the Budget announcement that HMRC will get preferred creditor status in insolvencies from 2020, Peter Kubik, turnaround and recovery partner in our London office, comments:

“HMRC getting preferred creditor status in insolvencies is going to push ordinary trade creditors much further down the pecking order.”

“The Chancellor has suggested that this is a measure to combat tax avoidance, but there is a risk that this will simply transfer losses from the Treasury to the private sector.”

“It’s going to be the ordinary suppliers left out of pocket in a lot of cases, such as the raft of big CVAs we have seen in recent times.”

“In some cases, employees are also going to see significantly smaller pots when their businesses go bust as more money goes to HMRC.”

“There may well also be knock-on effects on the cost of borrowing – banks will want to see the additional risk they are now taking reflected in the rates they charge.”