Come 6 April 2020, HMRC will resume its position as a preferential creditor.

This means that tax claims, previously ranked as unsecured debts, will now rank before those of floating charge holders.

The prescribed part, introduced to make some funds available to unsecured creditors (and temper the gain to floating charge holders following the loss of the Crown preference in 2003) will however remain — arguably a double blow to floating charge holder, usually banks that lend money to businesses.

So what is the predicted impact of these changes?

Eileen Maclean, director of Insolvency Support Services, takes a cynical view: the obvious winner will be HMRC, slipping back into the position of a preferential creditor and ranking only behind employee claims. The obvious losers are floating charge holders as these charges may no longer be quite as valuable.  

On this view can we expect a flurry of insolvencies, driven by HMRC seeking to recover tax liabilities? 

While that's good news for insolvency practitioners (IPs) who can perhaps expect more appointments, what of the aims of rescue and recovery which underpin the insolvency regime? Will we see more businesses failing because of intransigence on the part of HMRC?

And how will this change affect lending? It is not difficult to see lenders becoming more cautious in face of reduced protection in an insolvency situation. We may see a greater insistence upon asset-backed lending and fixed charges. However, that will not necessarily suit the Scottish market as English law enables fixed charges over more categories of assets than Scots law.  

Only time will tell what the real impact of the return of the Crown preference will be, but certainly the landscape will be very different after 6 April 2020.