HMRC Voting Rights

HMRC to become more active in voting on voluntary arrangements

Authored by Fiona Grant

Fiona Grant

View Profile
Approximate read time: 4 minutes

HM Revenue & Customs issued Insolvency Guidance on July 7th, 2022, in which they announced that they would be more proactive in exercising their voting rights on proposed insolvency arrangements where they are creditors.

Although HMRC has regained its status as a preferential creditor for certain debts in recent years, they don’t always exercise their right to vote on voluntary recovery arrangements like Company Voluntary Arrangements (CVAs).

What are HMRC’s voting rights?

When an insolvent company can’t repay its liabilities, it may be able to enter a Company Voluntary Arrangement (CVA). During this arrangement, the company repays a tailored, affordable portion of its debt in monthly instalments.

If that company owes VAT, PAYE, student loan repayments, employee National Insurance Contributions, and Construction Industry Scheme deductions to HMRC, then HMRC is a creditor. As such, they have a right to vote to approve or object to any insolvency arrangement pitched to them.

HMRC was an unsecured creditor in the repayment hierarchy until December 1st, 2020 when they became a preferential creditor again for the first time in nearly 20 years. Consequently, they now rank along with unsecured creditors in the repayment hierarchy, with only secured creditors with fixed charges and certain employee liabilities ranking higher.

While payments of VAT, PAYE, student loans, employee National Insurance contributions, and Construction Industry Scheme deductions are preferential, employer National Insurance Contributions and Corporation Tax remain unsecured debts.

What do the changes mean for insolvent companies?

As HMRC didn’t always exercise its voting rights, creditors with lower amounts of debt had a greater influence on whether arrangements were approved. Consequently, some proposed insolvency arrangements may have been rejected, causing HMRC to miss out on monies owed to them and sometimes stopping insolvency practitioners from enacting arrangements that might have delivered a better return to creditors.

In the statement, HMRC claim this change is partially motivated by the current economic climate and that in doing so, they will be supporting restructuring efforts as businesses try to recover from the turbulence of the last couple of years.

“This should secure the best return for HMRC as a creditor – provided the best possible proposal is submitted. It will secure a return for the exchequer now, and secure future revenue if the proposal is agreed and the business is able to trade out of current difficulties and return to a more stable on-going trading position.”

Insolvency Guidance, HMRC, July 7th, 2022.

So, while HMRC has reiterated that it might not always vote in favour of insolvency repayment arrangements, it looks like, in the future, they will be exercising their right to vote on insolvency proposals where money is owed to them.

What should you do if you have debts to HMRC?

If you have debts to HMRC, you might be worried this increase in proactive voting could mean HMRC won’t agree to any proposed insolvency arrangement. Remember, though, that HMRC, like other creditors, will want the best return, and they’re more likely to receive a better return than if they were to force the company into compulsory liquidation.

With this in mind, you do have several options to repay your debts:

  • Repay a portion of the debt in affordable, monthly instalments
    Company Voluntary Arrangements (CVAs) are one of the most popular arrangements to deal with company insolvency. Overseen by licensed insolvency practitioners, CVAs allow directors of insolvent companies to repay a portion of their debts in affordable, monthly instalments tailored to what the company can afford. The arrangement typically lasts four years, and once it concludes, the remaining unsecured debt is written off. HMRC debts can be included in a CVA, subject to creditor approval.
    More on Company Voluntary Arrangements (CVAs)
  • For specific debts to HMRC
    If your debts are specifically to HMRC, there is a specific arrangement designed to help you or your company repay. Time to Pay Arrangements (TTPs) are designed to help companies repay overdue amounts of corporation tax, PAYE, National Insurance or VAT in affordable, monthly instalments, usually over six to 12 months. Doing so shows a willingness to repay what you owe and should reduce the risk of further enforcement action.
    More on Time to Pay Arrangements to HMRC


HM Revenue & Customs (HMRC) returned to being preferential creditors in 2020, and according to their recent Insolvency Guidance, they plan to take a more proactive role in exercising their voting rights around proposed insolvency arrangements. HMRC is a preferential creditor for certain of their debts, meaning in a case of insolvency, they’re paid after secured creditors with fixed charges and employees in respect of certain liabilities, ahead of the unsecured creditors. While insolvent companies might worry this means they’ve less chance of having any insolvency arrangement approved, they should remember that creditors will want to receive as high a return as possible when considering any proposed repayment arrangement.

In addition to Company Voluntary Arrangements (CVA), designed to help companies repay their unsecured debts in affordable, monthly instalments, Time to Pay Arrangements (TTPs) allow companies to repay debts specifically to HMRC over a six to 12 month period.

Leave a comment