HMRC Regain Preferential Creditor Status

Posted: 17th February 2020

On the 6th April, as part of the Finance Act 2020, HMRC will regain its ‘preferential creditor’ status in relation to monies owed when a company goes into Administration or Liquidation.

Why is HRMC a Reinstated Creditor?

HMRC has long suffered as an unsecured creditor and it is thought the change in legislation will raise a further £185m a year for the state coffers.

The concern for suppliers is that the distribution of proceeds following the insolvency of the debtor will be significantly reduced once the secured creditors (including HMRC) have been paid what they are owed. It should come as no great surprise that HMRC is traditionally one of the larger creditors following the failure of a business.

How does this Affect Your Business?

Industry forecasters warn over Banks tightening their lending criteria and reviewing company overdrafts; which in turn could see more financially vulnerable businesses refused finance or their funding dramatically reduced.

This could have huge implications further down the line for businesses supplying products and services to “vulnerable” companies.  If these “vulnerable” businesses are unable to find finance and funding how will they pay on time, or at all? 

What can be a Solution?

Invoice finance offers a financial lifeline through immediate payment on issued invoices, ensuring cashflow and working capital creating stability, leading to growth so expansion opportunities can still be realised.

What’s more, invoice finance can offer bad debt protection, which offers added protection against a company’s vulnerable yet essential customers.  

In less than 5 Minutes you can get an ‘in principle’ invoice finance agreement online or call our friendly team on 01908 268888.