Following the publication of the draft Finance Bill 2019-20 on 11th July 2019 , Government have published a vast range of policy papers and draft legislation for the coming year.
- The Insolvency Act 1986 to be amended from April 2020 to move HMRC up the creditor hierarchy for the distribution of assets in the event of insolvency by making HMRC a secondary preferential creditor.
- This means more taxes paid in good faith by employees and customers held temporarily by a business entering insolvency will go to fund public services rather than being distributed to other creditors.
- This will apply to VAT, Income Tax, employee National Insurance contributions, student loan deductions and Construction Industry Scheme deductions.
- Currently, the money for these taxes go towards paying off debts to other creditors.
- HMRC now have the power to issue notices to make directors of companies, as well as shadow directors, jointly and severally liable for a company’s tax liabilities.
- HMRC can issue these notices when liability arises or is expected to arise from tax evasion, tax avoidance, cases of repeated insolvency or a penalty for facilitating avoidance/evasion; and where the company begins insolvency proceedings, or is expected to do so, so some or all of the tax liability will be lost to HMRC.
- Government have drafted a clause which makes procedural changes to the General Anti Abuse Rule (‘GAAR’).
- The schedule will revoke previous sections in the GAAR regarding provisional counteraction notices, introducing new changes to increase simplicity.
- The new notice will enable HMRC to carry on investigations beyond 12 months.
- Currently, taxpayers who deliberately avoid providing HMRC with information frustrate HMRC’s ability to pursue the GAAR within the permitted 12-month window.
- New procedural changes to the GAAR will reduce ambiguity and ensure that enquiries can still be conducted using non-GAAR arguments in cases where HMRC decide against GAAR.
Aspire Comment
All the above clauses within the Finance Bill 2019-20 have a common theme – all bolster HMRC’s position in chasing and collating revenue that it believes it is due.
For more information, please see the following links below:
Clause 1: HMRC debts: priority on insolvency
Clause 1 and Schedule 1: Joint and several liability of company directors
Clause 1 and Schedule 1: Amendments relating to the operation of the GAAR