Question to the HM Treasury:

To ask the Chancellor of the Exchequer, if he make an assessment of the potential merits of (a) deferring the re-introduction of Crown Preference for 12 months and (b) capping the amount of reserves which will go to cover Crown Preference to a maximum of £1 million.

The Government’s reforms to HMRC’s preferential creditor status do not restore full “Crown Preference”. The Government has taken a proportionate approach, applying changes only to taxes paid in good faith by employees and customers, but held temporarily by the business, including Pay as You Earn (PAYE) Income Tax and VAT. This balances the interests of taxpayers, the Exchequer and other creditors. These reforms are not expected to have a significant impact on financial institutions, the lending market or the wider economy.

Businesses have had ample time to prepare for the changes. These reforms were first announced in 2018, and implementation has already been delayed from April 2020 to December 2020. The tax businesses temporarily hold on behalf of their customers and staff is not business income. It is right that the reforms do not include a “cap”, but apply to all relevant tax debts held temporarily by the business.