HMRC debts causing more businesses to fail, figures show
Britain’s complex tax system has caused a rise in the number of companies collapsing because of their debts to HMRC, according to a report. HM Revenues & Customs has emerged as the largest single creditor in 65% of cases where a business has been liquidated, a Freedom of Information request by Enterprise Tax Consultants has …
Britain’s complex tax system has caused a rise in the number of companies collapsing because of their debts to HMRC, according to a report.
HM Revenues & Customs has emerged as the largest single creditor in 65% of cases where a business has been liquidated, a Freedom of Information request by Enterprise Tax Consultants has revealed.
The tax authority was the principal creditor in 1,920 of the 2,955 compulsory liquidations over the course of the last full financial year, an 11% rise on 54% recorded five years ago.
However, it came as the Insolvency Service data also showed that compulsory liquidations had fallen by more than 40% since 2012.
Andy Wood, technical director of Enterprise Tax Consultants, said the data showed how firms were unable to grapple with an increasingly complex tax code.
He said: “Some might be tempted to view the numbers as positive in that they demonstrate a significant drop in the number of compulsory liquidations but the figures become significantly less so when one considers debts owing to HMRC.
“It’s not just the increasing frequency with which the HMRC is named as either one of many creditors or, in fact, the principal creditor but the sums owed.
“The total amount claimed by HMRC has risen by almost 50% in the last year alone.
“Even if you discount the potential for small numbers of businesses with large tax debts to skew the overall picture, the median average has increased by half in the last five years.
“I believe that is a real cause for concern and tallies with accounts from companies to which we’ve spoken, many of which describe difficulties in grappling with an ever-longer tax code.
“For smaller companies, in particular, which are unable to afford to appoint someone specialising in company finances, it can be a real strain and actually detract from their ability to get on with doing whatever they were established to do.”
The amount owed to HMRC jumped 47% to around £830 million last year, in contrast to the 2015/16 financial year.
An HMRC spokesman said: “The fluctuation in insolvencies is not due to any single cause but a range of factors.
“HMRC will always offer practical support to viable businesses and there are over 1.5 million time-to-pay arrangements in place at this time supporting British business.”
Sorry, we are not accepting comments on this article.