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I think the author has not explained this issue sufficiently. HMRC only becomes the preferred creditor for taxes, including NIC's, that have already been collected from the employees. It isn't the preferred creditor for the taxes due, e.g. VAT and corporation tax, from the employing organisation.
It includes VAT.
"This reform will only apply to taxes collected and held by businesses on behalf of other taxpayers (VAT, PAYE Income Tax, employee NICs, and Construction Industry Scheme deductions). The rules will remain unchanged for taxes owed by businesses themselves, such as Corporation Tax and employer NICs. "
Call me a fool (thats quite enough), but I forgot that HMRC ceased to become a preferential creditor in 2002, I think HMRC are fed up with settling for 10p in the £1. But at least HMRC have a strong legal arm a lot of creditors do not.
Also I am unsure if the following is true, (its always Rent, rates, the minimum wage, Utility costs....., never the Directors).
“The key causes of insolvencies seen by the insolvency profession are familiar. Rates problems, particularly for retailers,
The other side to this is that HMRC whose collection arm is pretty useless will take the view that their risk is reduced and be even less efficient than they are at collection.
We have seen attempts to collect supposed PAYE underpayments a year later - they are usually wrong mind you - and they seem to be a bit slow generally to raise their heads above the tea trolley.
The effect of this is to encourage traders to use HMRC as a bank which doesn't really help anyone especially the creditors whose position has been made that much worse now.
Another case of unforeseen circumstances by HMG who are probably rubbing their hands in anticipation of extra money but they will probably be too late as HMG will usually be the last to be paid.
It was never the business's money in the first place because they collect it from the customer / employee / subcontractor and pay it over to HMRC. It should, therefore, in an ideal world, never form part of the business's working capital.
Other creditors, including HMRC when it comes to Income / Corporation Tax, are paid out of the working capital of the business.
I'm not saying I do or don't agree with it but that's basically their argument.
mainly because they are what is called "involuntary creditors" Also the company is in effect collecting tax on behalf of HMRC so should really pass it on
As bendybod says - PAYE,CIS and VAT are never the company's money in the first place. I always tell my VAT clients that they are collecting for HMRC 'its not your money' I say.
Andrew V12 is wrong to say 'its never the directors'.
See my article on how the directors can be made to pay personally if the company goes bust.
https://www.accountingweb.co.uk/practice/general-practice/get-the-detail...
I wouldn't mind it if amounts owed to directors / shareholders or connected parties were given a lower priority.