UK: Budget day - insolvency and corporate announcements

The Government's 2018 Budget was presented yesterday. Copies of all of the budget documents are available here, here and here. A couple of proposals were announced concerning insolvency and corporate law.

The first is the introduction, from 6 April 2020, of a new class of preferential creditor in the context of company insolvency. This new preferential creditor will be HMRC in respect of the taxes collected by companies on behalf of employees and customers.  Further information about this change (including details of the current ranking of creditors) is available here (pdf).

The second is the announcement that with effect from the date on which the Finance Bill 2019-20 receives Royal Assent (as the Finance Act 2020, the Act relating to the 2019 Budget), directors will, in certain cases be jointly and severally liable for company tax liabilities. The budget report (at para. 4.19) states, somewhat vaguely, that this will arise in cases of "...tax avoidance, evasion or phoenixism ... where there is a risk that the company may deliberately enter insolvency".

UK: Budget day - business tax road map published

Today was the annual budget day in the United Kingdom and, included in the budget publications, was a road map for business taxation: see here (pdf). The headline proposal is a reduction in the rate of corporation tax to 17% in 2020. The road map also explains how the Government proposes to implement the 15 OECD BEPS actions, which includes the introduction on 1 April 2017 of a restriction on the deductibility of corporate interest expenses. The restriction will be achieved by a fixed ratio rule limiting the deduction (for corporation tax purposes) to 30% of a group's UK earnings before interest, tax, depreciation and amortisation.

Changes to the loss relief rules for companies are also proposed. More specifically, for losses incurred on or after 1 April 2017, relief will be available against profits from other income or from other companies within a group. A limit on the amount of relief available each year for losses carried forward will also be introduced: from 1 April 2017 it will be 50% of profits (but only where profits are in excess of £5 million).