As part of the UK Budget on 29 October 2018, HM Treasury announced that as of April 2020 HMRC will have greater priority to recover taxes paid by employees and customers when a company goes into insolvency. In a short policy paper entitled “Protecting your taxes in insolvency” the government explained that it will change the rules so that more of the taxes paid by employees and customers but held, in its words, in trust by a business, go to fund public services rather than being distributed to other creditors such as financial institutions.
At present, there is no detail as to how this change will be implemented, other than that HMRC would again become a preferential creditor in an insolvency for certain tax liabilities (including Value Added Tax (“VAT”), Pay-As-You-Earn Income Tax (“PAYE”), employee National Insurance contributions (“NICs”) and Construction Industry Scheme (“CIS”) deductions). However, other taxes payable by a company on its own behalf (e.g. Corporation Tax and employer NICs) would not have priority status.