Who has priority??

Who has priority??

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One of my clients recently passed away, leaving debts left, right and centre.  There is some dispute as to who or what gets paid from the estate (assuming there will be some left, which is somewhat in doubt), and I am asking if anyone has the definitive answer.  He owed money to the bank (current accounts and loan accounts), HMRC (VAT and PAYE/NIC), numerous trade creditors, his parents, and another personal friend.  The executors have been advised by a solicitor that the hierarchy is firstly funeral and legal expenses; secondly the bank, then creditors.  I am certain that HMRC comes before creditors, but would like verification.  Thanks in anticipation.

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By tom123
26th Aug 2013 14:28

Crown preference abolished

As far as I can recall, crown preference (ie HMRC) was abolished some years ago, so HMRC just stand in line with the other creditors.

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David Winch
By David Winch
26th Aug 2013 14:31

If . . .

If the bank holds some security on the assets of the deceased, then I would agree with the solicitor.

There is no reason for HMRC to come ahead of other unsecured creditors (and hasn't been for the past 10 years or so).

David

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By Amber21
26th Aug 2013 14:44

Thank you both.

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By neildempsey
28th Aug 2013 12:29

Executor needs to be very careful...

In Scotland, if an executor doesn't petition for sequestration (Scots Law bankruptcy) of the deceased person's estate or for the appointment of a judicial factor to administer the estate within a reasonable period after which he knew, or should have known, that the estate was absolutely insolvent and likely to remain so, and funds he pays out may require to be repaid, potentially by the executor himself.

I don't know if there is an English law equivalent (I'm an IP based in Scotland, and don't deal with English insolvency myself) but if there is, the executors need to have much more specific advice than would appear to have been provided thus far, to protect their own positions.

 

Neil

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