CM December DECEMBER 2018

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INSOLVENCY Budget 2018 The potential impact on insolvency following the budget announcement. AUTHOR – David Kerr MCICM David Kerr IN among Philip Hammond’s jokes and the headlines about the ending of austerity, one of the main points likely to attract interest from creditors is the announcement regarding the position of HM Revenue & Customs in insolvencies. In a surprise move, after dealing with the new digital tax on corporate giants in his speech, he switched to a measure that seems to be characterised as part of a push on tax avoidance, saying: ‘We must also make sure people play by the rules. We’ll make HMRC a preferred creditor in business insolvencies to ensure that tax which has been collected on behalf of HMRC is actually paid to HMRC.’ This is not a criticism of insolvency practitioners. The Government removed the Revenue’s preferential status some 15 years ago as part of an initiative to boost enterprise and allow more money in insolvency cases to flow through to other creditors. At the same time it introduced the prescribed part rules so that the tax man’s sacrifice wasn’t entirely eaten up by secured creditors with floating charges. While some see the return of HMRC’s preferential status as a backward step, it might be viewed in conjunction with an intention to increase the value of the prescribed part, and perhaps more widely in the context of other businessfriendly Budget measures. Irrespective of the merits of the Chancellor’s move (and the Treasury’s argument that this money should go to fund public services ‘as intended’) and bearing in mind that the Finance Bill has yet to be passed, the limited information published to date makes interesting reading. The taxes at the heart of the measure are VAT, PAYE/NIC and construction industry scheme monies collected or deducted by companies and not passed over to HMRC at the commencement of insolvency. Non-payment of such monies is already a consideration in director disqualification cases, but that hasn’t stopped directors using those funds to finance trading when companies are in distressed situations. Other tax payable by the business is not affected. The proposed change (alongside other tax avoidance rules targeted at directors) will come into force on 6 April 2020, so that in respect of insolvencies commencing on or after that date the new preferential status will apply. UNSECURED CREDITORS? A key element of the new proposal is that in respect of the affected taxes, HMRC’s preferential status will be secondary to existing preferential creditors such as the Redundancy Payment Service. So, the creditors impacted will be floating charge holders and ordinary unsecured creditors. Treasury makes the point that lending to businesses should not be affected in a ‘material’ way, as fixed charges holders are unaffected, and the reduced recovery by floating charge holders represents only a ‘very small fraction’ of total lending; some may disagree. There will of course be a negative impact on unsecured creditors, but Treasury argues that most will not be affected as they are usually unable to recover their debts in any event (only four percent of debts owed on average, it states). Some might argue with these figures and their assessment of the impact on unsecured creditors; inevitably, those cases which produce dividends will in future be likely to produce smaller dividends (or none at all) for those at the bottom of the insolvency pecking order. It is interesting to be returning to something that existed for the first half of the 30-year period since the 1986 Insolvency Act. There is some clue to the Government’s thinking in the wording of the HM Treasury statement which suggests these taxes ‘paid in good faith by (a business’s) employees and customers’ are ‘held on trust’ by the business. There has not been any suggestion that they will be regarded as trust monies in a way that would create all sorts of legal complications, merely a hint that HMRC has a moral case for jumping the queue and claiming its dues (estimated by Treasury to be £185 million per annum) on behalf of the Great British public and taxpayers. Finally, there has been no published information at this stage suggesting a limit on the new preferential claims, unlike the position with Revenue preferential creditor claims pre-2003; also, while the announcement refers to businesses and could in theory cover individual insolvent traders, the focus appears to be on corporate insolvencies. Further clarification is awaited on these points. David Kerr MCICM is an insolvency practitioner with extensive regulatory experience. We must also make sure people play by the rules. We’ll make HMRC a preferred creditor in business insolvencies to ensure that tax which has been collected on behalf of HMRC is actually paid to HMRC. The Recognised Standard / www.cicm.com / December 2018 / PAGE 12
OPINION First impressions Philip King FCICM reflects on a busy and exciting year for the CICM, and a series of ‘firsts’. Philip King FCICM THEY say that time flies when you’re having fun. That may be the case, and often is, and it is certainly true that 12 months can go by in a flash when you are busy, and the Chartered Institute of Credit Management has probably had one of its busiest years since I became Chief Executive in 2006. Three key purposes of the CICM are to raise awareness of the importance of credit management, drive best practice, and support credit professionals as their careers develop. The launch of our Credit Champions documentary at the start of the year ticked all three of those boxes and more. A collaborative initiative with ITN Productions, it was launched to wide acclaim at the Credit Summit in March, and is a programme we are looking to revisit in 2019. Indeed 2018 was a year of significant ‘firsts’: our first venture into television documentaries; the launch of our Knowledge Hub, providing members and subscribers with access to more than 1,000 knowledge resources covering the entire credit management lifecycle; and the launch of our CICM Mentor Hub, a simple yet highly-practical way of matching suitable mentors and mentees. We also launched our new CICM branch in Ireland, (see November 2018 news), and I have been delighted with the enthusiasm shown by the newly-appointed officers and the levels of engagement already being realised. The thirst for knowledge around best-practice in credit management, not just in the UK but also internationally, was evidenced by the broad spread of nationalities represented in recent exams. Students in no fewer than 17 different countries, from the UK to the US, chose the education pathway offered by the CICM, confirming in my mind the essential role that the CICM continues to play in delivering real expertise. That does not mean we can rest on our laurels, and as you can read on page 46, we are continually looking at how our qualifications can be further enhanced to meet a new generation of credit professionals, as well as how we can support a growing number of apprentices. Closer to home, we celebrated yet another successful event with our CICM British Credit Awards and look forward to announcing our 2019 Awards winners in February. The Awards continue to grow in popularity, as does our CICMQ accreditation scheme that delivers real evidence of bestpractice credit management in action. Of course, we have had our challenges this year too. I do not always find myself in agreement either with my Peers in other leading business organisations, or with our MPs and public servants. I am continually frustrated by the late payment debate being hijacked as a point-scoring exercise without any real understanding of what can be a very complex issue. I will say, however, that by debating the issue, and challenging other people’s opinions, we are also managing to promote the importance of credit management, and I will continue to champion the value that professional credit managers can add to building better businesses. With that in mind, I wish you all a Merry Christmas and a happy and prosperous New Year. The Recognised Standard / www.cicm.com / December 2018 / PAGE 13
Page 1 and 2: CREDIT MANAGEMENT CM DECEMBER 2018
Page 3 and 4: 4 EDITOR'S COLUMN SEAN FEAST DECEMB
Page 5 and 6: ITSWISETOSTAYALERT! SANCTION &PEP D
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Page 9 and 10: Cedar Rose launches new late payer
Page 11: Bailiff research ridiculed as ‘ma
Page 15 and 16: OPINION Sean Feast FCICM Not so Fai
Page 17 and 18: “If you work hard then good thing
Page 19 and 20: OPINION BUDGET SURPRISES Time to du
Page 21 and 22: ASK THE EXPERTS AUTHOR - Lauren Car
Page 23 and 24: Exclusive offers for all CICM and F
Page 25 and 26: OPINION AUTHOR - Peter Walker On th
Page 27 and 28: TRADE TALK A true collaboration Wor
Page 29 and 30: Fallen angels in the making FIRMS n
Page 31 and 32: COUNTRY FOCUS AUTHOR - Adam Bernste
Page 33 and 34: OPINION AUTHOR - Chris Sanders FCIC
Page 35 and 36: The Recognised Standard / www.cicm.
Page 37 and 38: PAYMENT TRENDS AUTHOR - Jason Braid
Page 39 and 40: CAREERS ADVICE CREDIT SALARIES UK 2
Page 41 and 42: A Credit Manager walks into a bar
Page 43 and 44: EXCLUSIVE REPORT AUTHOR - Nalanda M
Page 45 and 46: “CSA compliance essentials is a o
Page 47 and 48: CICM QUALIFIED your way CICM qualif
Page 49 and 50: CICM MEMBER EXCLUSIVE Your CICM lap
Page 51 and 52: 3 YEARS IN 2018 Credit Controller A
Page 53 and 54: MAKE YOUR CASE Karen Young Peter Wa
Page 55 and 56: Are you a Leader or follower? CICMQ
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Page 59 and 60: BRANCH NEWS A Successful Re-Launch
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FOR INFORMATION, OPTIONS AND PRICIN
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FROM THE ARCHIVE Credit Management
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CM December DECEMBER 2018

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