We’re a month in, and despite the Brexit leaving date this past Friday, 2020 has settled in and is well underway. So, what can be expected over the next 12 months in the Insolvency world?
Well, in the wake of the last year, with disaster on the highstreet and household names such as Thomas Cook falling to administrators as well as record levels of personal insolvency, 2020 doesn’t show any signs of slowing down.
Processes are changing
April will see the end of the government’s ‘reserved power’ regarding pre-packaged administrations, with further legislation changes expected to follow. The review that led to the introduction of SIP 16 was commissioned in 2013 and implemented by 2015. This led to 6 recommendations being implemented to improve transparency in the pre-packed process. With the expiry of these reserved powers, the next few months expect to show what will be brought in its place.
HMRC will be getting a pay day!
Announced in the budget in 2018 are plans to reintroduce HMRC to 2nd on the list of preferred creditors. The change, due to be bought into practice in April 2020, will return them to their pre-2002 position.
The policy, however, isn’t without controversy - with R3 campaigning against it, in the belief that boosting HMRC above unsecured creditors would be substantially more damaging to suppliers. News is expected in the Spring Budget as to whether or not their campaign has been successful. R3 has argued that the risks this presents to smaller, unsecured suppliers if they’re pushed down the priority repayment list and the knock on effect to securing credit in the future, should take precedent to recover the government's estimate of £185m in taxes.
The countdown to implementation of the “Breathing Space” initiative has begun.
The initiative, scheduled to be implemented by 2021, will give individuals 60 days free from accruing fees, interest, and charges on personal debt - an option designed to give people the opportunity to seek help and guidance. This will be available to those with ‘problem debt’ - debt which they are struggling to repay - who stand a realistic chance of entering either insolvency or debt management plans.
Following the demise of Monarch Airlines in 2017, draft legislation is expected this year on the insolvency element of the government's aviation 2050 initiative.
Recommendations made last year would place passenger repatriation at the top of the priority list, with the introduction of a ‘special administration regime’ designed specifically for airlines. The disastrous and well documented collapse of Thomas Cook at the end of last summer has brought the issue into sharp focus, so this legislation is hotly anticipated!
In terms of reform, it’s not just aviation insolvency and HMRC which can expect changes, but also Pensions.
The Pensions Bill Scheme Bill had its second reading in the House of Lords just a couple of days ago on the 28th of January, outlining the intention to levy criminal charges on those who are “involved in conduct risking accrued scheme benefits”. Aimed at preventing misleading advice being given to pension trustees, the bill will continue to move through the House of Lords to the report stage.
Of course, Insolvency is far from predictable, so these reforms are likely to be the tip of the iceberg - particularly in the wake of Brexit.
For more details about the effect of Brexit on UK insolvency, see my previous blog, We need to talk about Brexit... how will UK insolvency be affected?
Alice Cahill is an Insolvency Recruitment Consultant in the Accountancy Division at Harvey John.
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