BusinessBusiness RecoveryAssurance given to struggling businesses

Assurance given to struggling businesses

The government have given an assurance that Customs and Excise and the Inland Revenue will not react to losing Crown Preference by making businesses with a chance of recovery, bankrupt earlier, in order to preserve revenue.

Link: Enterprise Bill to kick-off parliament

Trade minister Melanie Johnson, a former Treasury minister, gave the assurance in the Commons as MPs agreed most of a series of Lords amendments to the Enterprise Bill reforming bankruptcy and competition law.

She also claimed fat cat liquidators would be prevented by the courts from exploiting new rules allowing them to apply to scrap distributions to unsecured creditors where the cost is ‘disproportionate to the benefits’.

The danger of IR and Customs acting sooner and more precipitately was raised by London and Westminster Tory Mark Field, who said that with Crown Preference tax officials had felt able to come to arrangements with businesses – like some of the shaky-looking football clubs – so they could pay off tax debts over time instead of up front.

And Tory English ICA MP Mark Hoban, a former PricewaterhouseCoopers senior manager, said IT companies, architects or design companies could also be affected.

He said a slight pause in income flow or debt collection could end up ‘triggering bankruptcy by the IR or Customs to get the money immediately rather than let the business trade through’.

Johnson reassured MPs that the IR and Customs had undertaken not to precipitate bankruptcies in order not to lose out under provisions ending the Crown Preference that currently secures unpaid taxes in a bankruptcy.

She said: ‘The revenue departments have assured us that, in pursuing outstanding debts after abolition of preference, they will continue to offer help and support to vulnerable businesses facing genuine temporary difficulties.

‘That includes support for business rescues via voluntary arrangements and for companies in administration.’

She said the Crown departments would not lose out altogether anyway – because they would benefit from money becoming available to other creditors

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