Chancellor scraps Crown preference
The government has finally bowed to the pressures of the business recovery community, proposing Crown preferential status be abolised and existing insolvency laws modernised.
In a statement issued today, chancellor Gordon Brown said the Treasury would abolish Crown preference, the procedure that allows the Inland Revenue and Customs & Excise to receive money from a company ahead of other creditors. The chancellor said the move could cost the government about £100m a year.
Crown preferential status has been a bone of contention between the government and insolvency practitioners. It is seen as a major stumbling block in the company rescue culture in industry circles.
Roger Oldfield, president of R3, the association of business recovery professionals, told Accountancy Age: ‘There is no commercial sense in my opinion for [the Crown] to have preferential status. And if they didn’t have preferential status they may work more efficiently as other creditors do.’
The chancellor also said: ‘Because small business growth rest not just on increasing rewards for success but minimising the costs of failure, the secretary for industry will announce major changes to the rules on insolvency, including abolishing administrative receivership.’
Instead of administrative receivership, which gives control to just one creditor, the government is proposing that a system based on collective procedures be set up, giving duty of care to all creditors.
Other measures regarding the modernisation of personal insolvency include the reduction of penalties to bankrupts who were not deemed to be dishonest and increasing penalties for rogue directors.
Proposals on the modernisation of insolvency laws will be outlined in a white paper to be issued in July.
Links
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