Simmons & Simmons response to the consultation issued by HMRC on 26 February 2019 entitled “Protecting your taxes in insolvency”.
Simmons & Simmons response notes that whilst HMRC may be attracted by the argument that it should be treated as a preferred creditor in circumstances where a business has collected in taxes paid to it by third parties and goes into insolvency before passing on those taxes to HMRC (third party taxes), such a change would be a retrograde step which is not in line with international norms.
In particular, Simmons & Simmons response, which is limited to the tax policy aspects of the proposals only, focusses on concerns that we have regarding:
- the potential impact of the proposals on securitisation and related arrangements, where it is essential to have certainty over the liabilities, including tax liabilities, that will be incurred by the company issuing the securitisation bonds and any related companies that hold assets connected with the securitisation, and
- the blanket application of the policy to all VAT liabilities, including liabilities (such as those arising under the reverse charge) which do not fall into the category of third party taxes.
Our consultation response can be read in full here.
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