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<p>The Government’s reforms to HMRC’s preferential creditor status do<em> not </em>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.</p><p> </p><p>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.</p><p> </p>
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