Credit, Collections & Insolvency News
Data analysed by Mazars show the number of struggling firms striking Company Voluntary Arrangements (CVAs) with creditors has fallen 47% in the past year since a 2020 change to the law made HMRC a preferred creditor when firms go bust.
CVAs, in which struggling firms strike agreements with their creditors to pay off debts, have fallen to just 110 in the last 12 months, down from 206 in the previous year, according to data analysed by tax and advisory firm Mazars.
The agreements have offered a liferaft to sinking firms and helped preserve jobs. But Mazars said that a 2020 change to the law to the way that HM Revenue & Customs can recover tax debts has made CVA a more difficult option for firms and could lead to a surge in businesses filing for administration.
Rebecca Dacre, Partner at Mazars said “It is understandable for HMRC to be a preferred creditor with a view to recover money owed to the taxpayer. But it must be recognised that the unintended consequence of this is fewer companies entering a CVA.”
“The change will mean directors will have fewer insolvency options, leading to worse returns for other creditors and “ultimately more administrations.”
