This measure was first announced for the 2018 budget. An amendment will be made to insolvency legislation to move HMRC up the creditor hierarchy for the distribution of assets in the event of insolvency.
The reform is intended to only apply to taxes collected and held by businesses on behalf of other taxpayers. Accordingly the taxes for which the new rules will apply to include:
- Income Tax collected via PAYE
- Employee National Insurance Contributions
- Student Loan Deductions
- Construction Industry Scheme deductions
The rules will remain unchanged for taxes owed by the business themselves e.g. corporation tax and employer National Insurance Contributions.
What should you do?
If you are a creditor of a company that is at risk of going insolvent then be aware that from 1 December 2020, your debt recovery may be adversely impacted as a result of this change.
Read more on the Budget here,