Brumark Decision Causes Lending Concern
The Brumark Ruling, which was made as a result of an action brought by The New Zealand Tax Authorities in May this year, is likely to have a significant impact on both corporate lending by UK banks and the willingness to borrow by SMEs, warns Ian Wilkins, regional managing director of Cattles Invoice Finance.
"The Brumark decision which is likely to become law in the UK earlier next year means that banks can no longer have a fixed charge on book debts," explains Wilkins. "This means that the proceeds of book debt realisations in a liquidation will be classified as floating charge realisations, putting banks in the queue for payment behind the preferential creditors including PAYE and VAT.
"This could obviously represent a huge reduction in the security available to the banks and could result in them being unwilling to lend in the way that they have in the past."