preferential debt

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The debts of a company on winding-up or of an individual on bankruptcy that have priority over unsecured debts and those secured only by floating charge. They are defined in the Insolvency Act 1986 and include debts to the trustees of occupational pension schemes and to employees in respect of outstanding remuneration. Debts owed to the Crown (i.e. to HM Revenue and Customs) ceased to be preferential debts from 2003.

Subjects: Law.

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