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RSSG THOUGHT FOR THE MONTH | NOVEMBER 30 Nov 2020 The return of Crown preference: a backwards step

In a move harking back to the last century, from 1st December 2020, HMRC will be bumped back up the insolvency waterfall for certain taxes collected by corporates for payment to HMRC, reducing returns to floating charge holders and unsecured creditors, as well as limiting the availability of CVAs as a restructuring tool. This will be more bad news for businesses struggling with the fall-out from coronavirus.

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When the final limb of Crown preference was abolished in 2002, this was seen as an equitable move promoting the rescue culture. The re-introduction of Crown preference is out of kilter with the international trend towards minimising the categories of priority debts in insolvency and is potentially damaging to the availability of credit as well as cash flow through supply chains, at a time when financial stability should be being prioritised. Olga Galazoula, RSSG Partner

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