15 November 2010
- 58% of all petitions submitted to wind-up companies are from HMRC
- Comprehensive Spending Review could lead to many more
HMRC was responsible for 58% of all the petitions submitted over the last year to wind-up companies compared to just 43% in the previous year, reveals research by UHY Hacker Young.
Petitioning to wind-up a company is the “nuclear” option used by creditors who hope to get paid back some of the money they are owed by having a businesses’ assets liquidated and sold off.
This one-third jump in HMRC’s share of attempts to wind companies up shows that HMRC, after a brief interlude, is taking an aggressive line against those businesses that can’t afford to pay their tax bill.
Our annual research shows that HMRC would have been responsible for attempts to wind-up approximately 6,400 companies over the last 12 months.*
Roy Maugham, tax partner in our London office says: “The taxman is shedding the more sympathetic stance it adopted towards struggling businesses during the recession.”
“HMRC has been willing to give struggling businesses some lee-way through their “Time-to Pay” scheme, but that scheme seems to be winding down and this jump in attempts to liquidate businesses is a clear trend.”
“Although there have been no official announcements, HMRC’s more considerate stance that it took to businesses during the recession has changed back to its pre-recession hard nosed approach. It is taking an unforgiving stance to businesses that cannot keep up with tax payments.”
The value of ‘Time to pay’ arrangements granted by HMRC has almost halved over the last year (down 45%) from £830m in Q3 2009 to just £460m in Q3 2010. In the last quarter alone, arrangements have fallen 16% from £550m in Q2 2010.
Roy says that it may be the Coalition Government’s commitment to reduce public borrowing that has allowed HMRC to take the gloves off again.
Roy says: “Although the economy has begun to show signs of recovery, many businesses are still short of cash. Businesses don’t delay paying tax for fun.”
Spending Review delivers blow
The cutbacks announced in the Comprehensive Spending Review (CSR) could leave increasing numbers of businesses facing the choice of delaying tax payments or going out of business.
Comments Roy: “With many businesses that are suppliers to the public sector facing the loss of crucial Government contracts, HMRC should announce a renewed commitment to the “Time to Pay” scheme.”
“In many cases that would be better for the Treasury coffers than pulling the plug on potentially viable businesses.”
High profile companies that HMRC have petitioned to wind-up within the last year include AIM listed companies such as 1st Dental Laboratories and Archial and a huge range of football clubs such as:
- Sheffield Wednesday Football Club
- Plymouth Argyle
- Cardiff City Football Club
- AFC Bournemouth
- Notts County
- Portsmouth Football Club
- Rochdale Football Club
- Southend United
% of total petitions to wind-up companies issued by HMRC - on the rise again
*Based on High Court statistics
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