Budget 2018: the chancellor has announced measures to ensure that taxes paid by customers and employees to companies going into insolvency are protected, by changing unsecured creditor priorities and making directors liable for company taxes in certain circumstances.
Following a Consultation on Tax abuse and Insolvency:
- From 6 April 2020 where a company becomes insolvent with unpaid tax liabilities which it holds in trust to pay to HMRC, such as VAT, PAYE Income Tax, employee National Insurance contributions and Construction Industry Scheme deductions, these liabilities will take priority over other unsecured or floating charge creditors.
- Other company tax liabilities such as corporation tax and employers NIC will not be affected by the measure.
- HMRC will remain below preferential creditors.
- Finance Bill 2019-20 will contain measures to allow HMRC to make directors and other persons involved in tax avoidance, evasion or phoenixism jointly and severally liable for company tax liabilities, where there is a risk that the company may deliberately enter insolvency.
- This will have effect from Royal Assent of Finance Bill 2019-20.
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