Taxes Consolidation Act 1997 section 960P

Bankruptcy: priority for taxes

Section 960P provides that certain tax debts owed to Revenue are treated as preferential debts in bankruptcy, arrangement and insolvency proceedings, giving them priority over ordinary unsecured creditors.

• Capital gains tax, local property tax and vacant homes tax are deemed preferential debts in bankruptcy alongside income tax under the Bankruptcy Act 1988.
• VAT (including interest), employer PAYE liabilities, relevant contracts tax and section 990 PAYE assessment arrears are also preferential for periods falling within the 12 months before the bankruptcy order, arrangement petition or date of insolvent death.
• Where a tax period straddles the boundary of the 12-month preferential window, the liability is apportioned on a time basis so that only the portion referable to the preferential period ranks as a priority debt.
• The employer's preferential PAYE liability is calculated as PAYE deducted plus PAYE on notional payments, less PAYE repayments due, plus interest on the amounts deducted and the notional payment amounts.