The North West chair of insolvency and restructuring trade body R3 is calling on the Government to scrap proposals to give HMRC priority for payment in insolvency cases.
Allan Cadman warns that the proposals will have a significant negative impact on access to finance for businesses, with financial services trade body UK Finance estimating that it could hit lending by at least £1bn per year.
The proposals are contained in the Finance Bill which is due to have its second reading on Monday. They would make HMRC preferential creditor in insolvency cases, allowing it to ‘jump the queue’ and get paid ahead of employees, suppliers, pension funds and some lenders.
Allan Cadman says: “At a time when the UK’s business community is reeling from the COVID-19 pandemic and the subsequent lockdown, this policy risks undermining the work the Government has done to protect businesses and preserve jobs through the support measures it has announced over the last few weeks.
“If this policy goes ahead, asset-based lenders will be far less likely to provide the finance needed for businesses because there will be a greater risk of losses in insolvencies. This type of lending is really important for retailers and small businesses – exactly the type of businesses most in need of help at the moment.
“This is not the way to go about increasing tax revenue from insolvencies. It makes no sense for these proposals to go ahead – not now, not even when the economy has recovered.”
Research by R3 last year showed that 78% of its members feared the proposals would make it harder to rescue businesses and 83% thought they would make it harder for firms to access the funding they need.
R3 is one of a number of UK business bodies that have been campaigning against the proposals and have warned they could cause long-term damage to the economy.
Allan Cadman adds: “At a time when the business community is in crisis, the Government needs to listen to the concerns of experts and explore other options for increasing tax revenue from insolvencies – ones that don’t damage other creditors, make it harder to rescue businesses and put businesses and jobs at risk.”
