To ask Her Majesty's Government what assessment they have made of the impact of the change in HMRC’s status as a preferential creditor on the borrowing capacity of small businesses.
Answered on
22 February 2021
The recent change 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 change is not expected to have a significant impact on financial institutions, the lending market or wider economy.
The Government has engaged extensively with stakeholders in the finance industry and held a formal consultation on the policy design. Having considered all views carefully, the Government believes these reforms take a fair and proportionate approach, balancing the interests of taxpayers, the Exchequer and other creditors.
This measure is forecast to raise up to £255 million a year. To put this into perspective, bank lending to small and medium-sized businesses alone in 2019 was £57 billion, and the majority of business lending is by fixed charges and is unaffected by this measure.
The OBR did not make any adjustments to their economic forecast in response to this measure.