Insolvency

Treasury written question – answered on 6th August 2019.

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Photo of Baroness Burt of Solihull Baroness Burt of Solihull Liberal Democrat

To ask Her Majesty's Government what assessment they have made of the impact that the proposal to make HMRC a secondary preferential creditor in insolvencies may have on business rescue support in the UK from April 2020.

Photo of Baroness Burt of Solihull Baroness Burt of Solihull Liberal Democrat

To ask Her Majesty's Government what assessment they have made of the impact that their proposal to make HMRC a secondary preferential creditor in insolvencies will have on the UK’s ranking in the World Bank’s annual "Doing Business" report.

Photo of Baroness Burt of Solihull Baroness Burt of Solihull Liberal Democrat

To ask Her Majesty's Government why HM Treasury has decided to not introduce a cap on the age of tax debts which will be eligible for secondary preferential status in insolvencies from April 2020; and what assessment they have made of the impact of this decision on the costs of insolvency procedures and business lending.

Photo of Baroness Burt of Solihull Baroness Burt of Solihull Liberal Democrat

To ask Her Majesty's Government why HM Treasury has decided that existing lending will not be exempted from their policy of making HMRC a secondary preferential creditor in insolvencies; and what assessment they have made of the impact of this decision on the continued availability of existing business lending.

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

This reform is designed to ensure that when a business becomes insolvent, more of the taxes paid in good faith by that business’s employees and customers will go to fund public services as intended, rather than being distributed to other creditors such as financial institutions.

This measure does not include a cap on the age of tax debts which will be eligible for secondary preferential status, nor an exemption for existing lending. Either proposal would introduce potential distortions into the lending market which the Government does not consider to be either fair or proportionate.

The Government does not expect this reform to have a significant impact on access to finance, the cost of borrowing, business rescue support in the UK or the UK’s ranking in the World Bank’s annual “Doing Business” report.

Consistent with the Government’s impact assessment, the independent Office for Budget Responsibility (OBR) did not make any adjustments to their economic forecast in response to this measure.

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