Whilst receiving a judgment in your favour may feel like the culmination of a potentially lengthy legal process, it may be just the first step (though an important one) on the path to financial recovery. In our latest insight, we look at how and when you can enforce a judgment to realise payment of any damages or costs which have been awarded.

What is enforcement?

The UK government has published a draft Finance Bill 2020, which includes a provision that, if enacted, will give HM Revenue & Customs (HMRC) secondary preferential creditor status for certain taxes which a company has collected but failed to pay to HMRC on the date it enters insolvency.

New Priority Status

Following a recent government consultation, new draft legislation is expected this summer which will render HMRC as a “secondary preferential creditor” in insolvencies that commence on or after 6 April 2020. The government’s objective is to ensure that more tax which is collected on behalf of HMRC (circa £1.9bn) is actually paid to HMRC and used to fund public services, and is not distributed to pay other creditors.

Section 127 of the Insolvency Act renders void any disposition of property by a company made in the period between presentation of the winding up petition and the making of a winding up order on that petition unless the court orders otherwise. Guidance on applications for validation orders is given in the Insolvency Practice Direction (“PD”).

In a recent report by INSOL International, only 5% of insolvency practitioners (“IPs”) said that they had a “comprehensive or practical/working or understanding” of crypto-currency.

So with over 4,000 types of cryptocurrency now available and as payment technology continues to develop, we look at some issues facing IPs, including

• • How to identify cryptocurrency
  • How to categorise it
  • How to take control of it and sell it; and
  • What value does it have

What are cryptocurrencies?

On 11 July 2019, HMRC published its summary of responses to its “protecting your taxes in insolvency” consultation.

Following the consultation, the government will legislate in the Finance Bill 2019-20 to make HMRC a secondary preferential creditor for certain tax debts paid by employees and taxpayers. This change is intended to ensure that when a business enters insolvency, more of the taxes paid in good faith by employees and taxpayers go to the Exchequer, rather than being distributed to other creditors. Draft legislation and an explanatory note is also available.

The draft Finance Bill 2019-20 was published on 11 July 2019. It includes, amongst other provisions, changes to reinstate HMRC's status as a preferential creditor in relation to certain debts in corporate insolvencies. This will have an impact for all shareholders and creditors in corporate insolvencies where HMRC is also a creditor.

What is changing?

The press reported recently that British Steel Limited had been placed into compulsory liquidation putting 5,000 jobs at risk. The Official Receiver took control of the company as part of the liquidation process. We understand that British Steel Limited continues to trade normally, but the limited company was transferred to the Official Receiver because the company did not have sufficient funds to pay for an administration.

A statement from the Official Receiver reported

Introduction

Gurbinder Grewal and Michael Wright in the UK Construction Team explain the knock on effects of insolvencies and the mitigating steps that can be taken. Early warning signs of looming insolvency can be spotted.

Key points