Change to priority order on insolvency

The Autumn 2018 Budget included an announcement that the Finance Bill 2019/20 would include provisions to ensure that, from April 2020, HMRC will be a preferential creditor for taxes that a business collects from employees and customers, but does not pay over to HMRC, before it enters insolvency.

HMRC launched a consultation on this change just before the 2019 Spring Statement and, on 11 July 2019, it published a consultation response, a policy paper, draft legislation and an explanatory note.

These documents confirm that the taxes for which HMRC will be a preferential creditor will be VAT, PAYE (including student loan repayments), employee NICs and Construction Industry Scheme deductions.

They also confirm that:

  • the change in priority order will apply to insolvencies starting on or after 6 April 2020;
  • HMRC’s claim will not be subject to a time limit; but
  • HMRC will only be a preferential creditor for the taxes and not for related interest and penalties.

Open Trustees comment


This change is being made in order to ensure that these taxes are available for spending on public services, instead of being used to help to meet the claims of other creditors. This is understandable.  For pension schemes, the key point to note is that the change will reduce the pool of assets available to unsecured creditors in the event of employer insolvency.

16 July 2019