19 March 2020: There were of course a raft of changes announced in the new Budget on 11 March but one of the more significant in our line of work was that the partial return of Crown preference will be delayed to 1 December 2020. This had been expected to come in to force for insolvencies commencing after 6 April 2020 and would have given HMRC priority in the recovery of certain debts (including VAT, PAYE, NIC and CIS deductions) i.e. they would come higher up in the “pecking order” when creditors were paid by an office-holder.
The Government received a number of responses to the consultation document published in July 2019 which expressed concern that by increasing the pool of preferential creditors there would be an impact on lending if the lender (who would usually take a floating charge over the company and its assets) was less likely to be confident in their position being secured as well as the potential for the return to unsecured creditors to be adversely affected. The Government said that it anticipated this change would have no material impact as the loss to lenders would be a fraction of total lending compared to the financial benefits it would bring to HMRC and suggested that the increased tax revenue could raise up to £185m annually for public services.
There is likely to be a small sigh of relief from lenders upon hearing that the partial return of Crown preference will be delayed – suffice to say that all BRI systems had already been updated in preparation so we are fully prepared to hit the ground running when the time comes however.
Another announcement in the Budget related to IR35 tax reforms and a lot has been published on that elsewhere so we won’t cover that off in any further detail here but it was announced on 17 March that due to the coronavirus pandemic these changes will be deferred until 6 April 2021 as part of a broad package of measures that the Treasury has announced to protect the economy during these troubling times. Whilst only a deferral rather than a cancellation, contractors will no doubt be pleased that they can concentrate on more important matters for now.
We would like to wish all of our clients and contacts well during these times of uncertainty and hope that everyone manages to remain happy and healthy. We are still open for business so please do not hesitate to get in touch if there is anything we can assist with.