VAT deferrals and what they mean for Law firms
Posted on 11th May 2021 at 13:00
Insolvency Act 1986 – What do the changes in 2020 actually mean?
Before December 2020, HMRC sat behind all secured creditors in the event of insolvency. From Dec 20, VAT, PAYE income tax, employee national insurance contributions and student loan deductions (these are the preferred priority taxes) are now ‘preferred’ creditors.
The change moves HMRC alongside unsecured creditors, ranking only behind fixed charge security and liquidation/administration expenses and ahead of the floating charge holders, unsecured creditors, and shareholders.
Does it make any difference to law firms and their banks? Well possibly yes. Banks may choose to look more closely at the debt firms hold with HMRC. We’ve seen many of the questions adopted from CBILs application questionnaire for some of the recent funding for VAT, TAX and PII. The banks are certainly more cautious but working closely with a finance broker can help you to avoid some of the banks who are placing greater emphasis on HMRC debt. Thankfully, we don’t ask these questions for our “own book” funding where we still provide short term funding with NO document fees, 24-hour decisions and electronic signatures. Our VAT funding can be made available with a 12-month rolling facility which you can either choose to roll over or step out of when the cash flow is good.
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Ryan works exclusively with law firms and understand all aspects of the legal market and requirements.
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