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Under the Finance Act 2020, HMRC regained its status as a secondary preferential creditor in insolvency processes that commenced on or after 1 December 2020. This change has had significant implications for businesses which were funded by working capital facilities reliant on floating charge security, including overdrafts, cash flow loans and inventory funding lines.

The changes reversed the alterations made in the Enterprise Act 2002, with HMRC now ranking ahead of floating charge secured creditors in respect of creditor claims of unpaid VAT, PAYE and Employee’s National Insurance Contributions.  Whilst HMRC’s claims rank below employee preferential employee claims, they erode floating charge asset realisations that previously would have been available to secured creditors holding a floating charge.

This weakening of the funder’s security position has forced many lenders into revisiting their existing facilities, and many (specifically Asset Based Lenders) have looked to reduce exposure against floating charge assets. Those with inventory funding facilities have either increased reserves to offset the HMRC preferential claims reducing overall available funding, or they have withdrawn facilities altogether, often where the HMRC liabilities outweigh the available security.  Some lenders have even completely exited the inventory funding market as a direct response to the reintroduction of Crown Preference. 

The introduction of these provisions of the Finance Act 2020 has created much debate, with the Government arguing that the changes would provide a better outcome for taxpayers, predicting additional recoveries of £185m per annum.  However, many businesses and their lenders saw the move as a backward step that would create hardship for thousands of businesses already struggling with the challenges of the COVID-19 pandemic.

Many have argued that the return of Crown Preference in the midst of the most severe economic crisis since World War Two is not consistent with the wider Government support measures in place.  As of February 2021, the UK Government had guaranteed £73bn of lending to UK businesses impacted by COVID-19. Perhaps ironically, for many businesses the COVID-19 support measures have mitigated the loss of funding caused by the return of Crown Preference. However, the impact is arguably only being deferred, as Government-backed loans are repaid, the loss of working capital funding will eventually catch up with UK businesses.  

Regardless of opinion, the reintroduction of Crown Preference appears to be here to stay for the foreseeable future.  Has Crown Preference marked the end of inventory lending? Or are some lenders finding creative solutions or alternative outlooks that are allowing them to continue funding stock.  Please join us at TMA North West’s next event, where our panel of speakers will be discussing how different lenders and appraisers have reacted to the changes and how they are still supporting new and existing clients in the face of Crown Preference.


This event is kindly supported by 

Kroll is the world’s premier provider of services and digital products related to governance, risk and transparency. We work with clients across diverse sectors in the areas of valuation, expert services, investigations, cyber security, corporate finance, restructuring, legal and business solutions, data analytics and regulatory compliance.

The firm’s nearly 5,000 professionals are located in 30 countries and territories around the world.

About the speaker/s

Annabel Todd, Regional Business Development Director at BREAL Zeta CF and TMA North West Board Member

Annabel Todd, Regional Business Development Director for BREAL Zeta in the North West has worked in the ABL sector for 13 years. She now runs the Manchester office for BREAL Zeta CF and is responsible for the originating and structuring of complex ABL and structured lending.

Annabel has a broad range of experience in ABL, Development and Construction lending, Property Development and FinTech. She has experience lending in a number or territories, mainly UK, Europe and North America. 

A recent transaction Annabel led was the structuring of a £16m ABL facility to support the acquisition of Evtec Automotive. The facility included a £3m acquisition loan which required a creative view on funding the inventory.

Annabel completed her BSc and MSC in Banking Practice and Management and is a Chartered Fellow of The London Institute of Banking and Finance and sit on their Board of Trustees.

Dan Edgar, Director of Inventory Appraisals at European Valuations

Dan Edgar, Director of Inventory Appraisals at European Valuation is originally from California but now based in London. Dan has over a decade of appraisal management experience to his credit.  Dan focuses on and manages our inventory appraisal, business valuation and accounts receivable service lines.  He has been involved in appraisals all over the globe, serving a wide variety of industries.


Dan has a wide-ranging knowledge of international affairs, especially within Europe, and is also experienced in financial modelling & analysis, project & risk management, mergers & business strategy skills which he utilises to manage projects consistent with our high level of quality and operational excellence.  Prior to co-founding European Valuations, Dan served as associate director for an advisory services firm where he was responsible for the oversight of their industrial inventory practice.  Dan graduated from the University of Santa Barbara with a Bachelors Degree in Business Economics and Global Studies, with an emphasis in Socio-Economic Studies of Europe.

Tom Weedall, Head of Originations at Wells Fargo Capital Finance and TMA North West Board Member

Tom is responsible for managing the UK Loan Originations team at Wells Fargo Capital Finance, developing comprehensive asset-based funding opportunities, and sourcing senior secured financing for companies operating within the software and technology sectors. He joined Wells Fargo Capital Finance (UK) Limited in 2016 from GE Capital where he spent 11 years working across a number of leadership roles including Commercial Portfolio & Workout Director, Credit Excellence Leader and Asset Based Lending Sales Director. Tom holds a degree in Business from Manchester Business School.

Partner at Gateley Legal and TMA North West Board Member

Stuart specialises in acting for debtors and for lending syndicates, banks, funds and other financial institutions in consensual and non-consensual restructurings, for investors in distressed acquisitions and for insolvency practitioners during pre-packaged and unplanned insolvency processes. He works predominantly in the North West and London.

Stuart advises on realising and maximising value in distressed situations, including consensual workouts and restructurings, whether these are delivered through distressed sales, enforcement, insolvency processes or distressed debt trading.


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