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Insolvency

Treasury written question – answered on 22nd May 2019.

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Photo of Baroness Hayter of Kentish Town Baroness Hayter of Kentish Town Shadow Spokesperson (Cabinet Office), Shadow Spokesperson (Business, Energy and Industrial Strategy), Shadow Spokesperson (Exiting the European Union), Shadow Deputy Leader of the House of Lords

To ask Her Majesty's Government whether the proposals in the consultation by HMRC Protecting your taxes in insolvency, published on 26 February, to reintroduce preferential status for any Crown creditor takes into account lost Government revenue resulting from other taxpayers suffering additional bad debts due to the priority payment of HMRC, and any consequential loss to the economy resulting other taxpayers themselves becoming insolvent due to an increased burden of bad debt; and what assessment, if any, they have made of the impact of that change on lending.

Photo of Lord Young of Cookham Lord Young of Cookham Lord in Waiting (HM Household) (Whip), Lords Spokesperson (Cabinet Office)

The ‘Protecting your taxes in insolvency’ proposals take into account lost government revenue resulting from other taxpayers suffering additional bad debts due to the priority payment of HMRC.

Lending against fixed assets will not be impacted by this measure, but lending against floating assets will be impacted, as HMRC will move above secured creditors with floating charges in insolvencies.

At Budget 2018, the independent OBR chose not to make any adjustments to their economic forecast in response to this measure.

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