What does the Finance Bill 2019–21 mean for insolvency lawyers?

The Finance Bill 2019–21 received its first reading in the House of Commons on 17 March 2020. Many of the insolvency-related provisions will already be familiar to insolvency professionals as the Bill carries over provisions originally introduced by the Finance Bill 2019, which fell away prior to the December 2019 general election. The main aspects of interest relate to the partial reintroduction of crown preference, joint liability for directors of tax debts in certain circumstances, and amendments to the Government’s loan charge scheme.

As anticipated, the Bill amends section 386 of the Insolvency Act 1986 (IA 1986) to partially reinstate crown preference. However, it delays HMRC’s elevation to secondary preferential creditor status from 6 April 2020–1 December 2020.

Only certain taxes will receive this preferential status, including VAT and ‘relevant deductions’ ie pay as you earn (PAYE), National Insurance contributions (NICs) and construction industry scheme monies collected or deducted by companies which are not passed over to HMRC at the commencement of an insolvency.

This aspect of the Bill is aimed at tackling abuse. The measures permit HMRC to issue joint and several liability notices to make directors and other persons involved in tax avoidance, evasion or phoenixism jointly and severally liable for the tax liabilities of a company. Such notices may also apply to members or shadow members of a limited liability partnership (LLP) where the company or LLP is subject to, or there is a ‘serious possibility’ of it being subject to, an insolvency procedure. This includes liquidation, administration, receivership, voluntary arrangements and schemes of arrangements, as well as any corresponding procedure in a country or territory outside the United Kingdom. The ‘serious possibility’ groun