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Written Question
Insolvency
Monday 8th February 2021

Asked by: Baroness Morgan of Cotes (Non-affiliated - Life peer)

Question to the HM Treasury:

To ask Her Majesty's Government what assessment they have made of the cumulative impact on business (1) lending, and (2) cashflow, of the extension of secondary preferential creditor status to HMRC in the context of (a) the changes to the insolvency regime brought in by the Corporate Insolvency and Governance Act 2020, (b) the increase of the maximum value of the prescribed part to £800,000 on 6 April 2020, and (c) the value of taxes deferred under the VAT deferral scheme.

Answered by Lord Agnew of Oulton

The recent reforms to HMRC’s creditor status for certain debts ensures that when a business enters insolvency, more of the taxes paid in good faith by its employees and customers, but held temporarily by the business, go to fund public services as intended, rather than be distributed to other creditors.

This measure is not expected to have a significant impact on the lending market or wider economy. The change is forecast to raise up to £255 million a year. To put this into perspective, bank lending to small and medium-sized businesses alone was £57 billion in 2019.

In 2020/21 this change is expected to raise an additional £40 million for the Exchequer. With regards to cash flow, the Government deferred an estimated £30 billion of VAT due during 2019/20 that can be paid off by instalments, interest-free, via the VAT New Payment Scheme as announced in the Winter Economy Plan.

At the same time, via changes to the Corporate Insolvency and Governance Act, there has been a moratorium on winding-up petitions by creditors, including HMRC. The changes to the Insolvency Act to increase the cap on the prescribed part is an overdue reform to bring it in line with inflation and has no detrimental effect on any of the other measures mentioned here.

The numerous support measures taken by the Government were put in place to prevent the failure or closure of viable businesses. The scale of these support measures far outweighs the recoveries that the Government would receive via HMRC’s preferential claims in insolvency.

Written Question
Insolvency
Monday 8th February 2021

Asked by: Baroness Morgan of Cotes (Non-affiliated - Life peer)

Question to the HM Treasury:

To ask Her Majesty's Government what plans they have to review the impact of the extension of secondary preferential creditor on levels of (1) business insolvencies, (2) job losses, and (3) the value of economic growth and taxes foregone, in 12 months’ time.

Answered by Lord Agnew of Oulton

The Government undertook careful work to assess the impact of the measures ahead of announcement and implementation. As with all tax policy changes, the Government published this assessment in a tax information and impact note which can be found on GOV.UK.[1]

The policy will be monitored through continuing communications with affected taxpayer groups and insolvency practitioners.

[1] https://www.gov.uk/government/publications/changes-to-protect-tax-in-insolvency-cases

Speech in Commons Chamber - Tue 02 Jul 2019
Oral Answers to Questions

"Is it not the case that Scotland, like everybody else, will know the plans for future public spending, for fiscal headroom and for the economic effects overall if the comprehensive spending review were to be started sooner rather than later? Is the Chancellor able to tell the people of Scotland, …..."
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Speech in Westminster Hall - Thu 06 Jun 2019
Consumer Access: Financial Services

"I beg to move,

That this House has considered the Twenty-ninth Report of the Treasury Committee, Consumers’ access to financial services, HC 1642.

It is a pleasure to serve under your chairmanship, Mr Walker. The Treasury Committee’s report “Consumers’ access to financial services” was published last month, its conclusions having …..."
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Speech in Westminster Hall - Thu 06 Jun 2019
Consumer Access: Financial Services

"I thank the hon. Gentleman. He is a legend for speaking in so many debates in this House, and I would feel rather excluded if he were not here today. I am grateful to him for raising those issues. He is a passionate advocate for his constituents, and has raised …..."
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Speech in Westminster Hall - Thu 06 Jun 2019
Consumer Access: Financial Services

"I do. I think the FCA is very aware of that, and wants to do better. That is why it has published the consultation on the definition of vulnerability. The hon. Gentleman and I have had previous conversations about the Financial Ombudsman Service, and I have had correspondence with other …..."
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Speech in Westminster Hall - Thu 06 Jun 2019
Consumer Access: Financial Services

"My hon. Friend is a new but valuable addition to the Treasury Committee and we enjoy having him as a member. He is absolutely right. From the evidence we heard, we concluded that many banks are ushering customers towards the Post Office, which is providing basic banking services to customers …..."
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Speech in Westminster Hall - Thu 06 Jun 2019
Consumer Access: Financial Services

"The hon. Lady is making an excellent speech, and she makes an excellent point on access to cash. Does she agree that cash is very important for people who are on a very tight budget? We heard evidence that once it’s gone, it’s gone. Somebody who needs to watch every …..."
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Speech in Westminster Hall - Thu 06 Jun 2019
Consumer Access: Financial Services

"I thank the hon. Lady for the many points that she is making. Did she, too, pick up Scope’s briefing for the debate, which makes the point that disabled people have an average of £108,000 less in savings and assets than non-disabled people? That is quite a staggering amount of …..."
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Speech in Westminster Hall - Thu 06 Jun 2019
Consumer Access: Financial Services

"I thank all the Members who attended the debate, including those who only intervened, and I thank the Minister for his thoughtful response. When a Treasury Committee report is described by the relevant Department as “interesting”, I hope that means that we have struck a chord somewhere along the way.

…..."
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