From 1 December 2020 HMRC will once again become preferential creditors in respect of VAT, PAYE, NI, Student Loan deductions and CIS.  This will not apply to Corporation Tax or Employer National Insurance contributions.

This means that HMRC will rank above secured creditors (relying on their floating charge security) and trade creditors.  The timing of any insolvency process is really important.  If you have any clients who are in financial difficulties and have personally guaranteed their banks it may be beneficial for them to commence the insolvency process prior to 1 December 2020.  If their company has substantial arrears with HMRC then it is unlikely that the bank will realise any funds from the insolvency process and will instead rely on the personal guarantee from the director.  Trade creditors will also suffer.

It will be interesting to see what stance banks take with ongoing loan applications as their security position weakens fro m 1 December 2020.