HMRC has issued temporary guidance on its approach when acting as a creditor in existing and new insolvency proceedings.
In short, it has relaxed its approach to defaults under existing voluntary arrangements, as well as pausing its use of winding-up and bankruptcy petitions in most cases as an enforcement mechanism until 1 July 2020 (by which point further guidance will be issued, depending on the COVID-19 situation).
The guidance states that, where debtors in a voluntary arrangement face defaulting on the arrangement or on their post-arrangement tax obligations as a result of COVID-19, HMRC would expect supervisors to exercise their discretion to a maximum where the terms of the arrangement allow for this.
The supervisor should refer such defaults for consideration by creditors only if essential. Where creditors must be consulted:
It was also confirmed in the Budget last month that, from 1 December 2020, HMRC will become a secondary preferential creditor (behind fixed charge holders and insolvency practitioner expenses) for certain taxes. The relevant taxes are those collected and held by businesses effectively on behalf of other tax payers, namely:
The existing position of HMRC as an unsecured creditor will remain for taxes for the account of/owed by businesses themselves (eg Corporation Tax and employer NICs).
Please contact a member of our Tax or Restructuring and Corporate Recovery teams if you have any queries about the above.