Tax Office Moves To Wind-Up Late Pay Firms

HM Revenue and Customs attempts to shut down companies late to pay tax have jumped by 57% in a year, according to a new survey.

Business advisory firm Wilkins Kennedy said HMRC presented 5,302 petitions to wind up companies in the year ending March 31 last year, compared to 3,367 in the previous period.

As a result the Tax Office is adopting a tougher stance to late-paying business, the survey suggests.

After firms enter "compulsory liquidation" following a winding up order, a liquidator can be appointed to sell of assets to generate cash to pay creditors.

HMRC can use the wind-up orders a to reclaim debts from businesses that cannot pay their tax due.

According to the research, HMRC has toughened its approach to struggling businesses compared to recent years.

Anthony Cork, partner at Wilkins Kennedy, said: "When businesses run into trouble, often one of the first things they do is try to delay tax payments to help manage their cash flow - this puts businesses on a collision course with HMRC.

"HMRC does not like being used as a 'lender of first resort', and is keen to dispel the image that it is a soft touch or that the unauthorised late payment of taxes is an acceptable way for a business to resolve cash flow problems."

Government pressure on the Tax Office has increased in recent years as receipts have fallen post-global financial crisis, with further reduction from the collapse in interest rates - with the base rate now sitting at an historic low.

Wilkins Kennedy said that the jump in winding up petitions coincides with HMRC's continued tightening of access to the 'Time to Pay' business scheme that was expanded during the recession.

Late last year electricals chain Comet went into administration owing an estimated £26m in unpaid VAT and payroll taxes to the Tax Office

HMRC winding-up petitions have also been placed on several sporting entities in recent years, including Chester City and Rangers.

Mr Cork added: "Businesses need to be very careful about getting on the wrong side of HMRC - these figures show HMRC has become increasingly unwilling to compromise in its pursuit of missing taxes."

But the Tax Office told Sky News action is only taken after significant consideration is taken into each firm's circumstances.

"HMRC's aim is not to wind up companies or make individuals bankrupt, but to collect, as efficiently as we can, the debts that are due," an HMRC spokesman said.

"HMRC only initiates winding up or bankruptcy action where it believes this is the best course of action to protect the interests of the Exchequer in respect of a particular debt. We do not take such action lightly.

"Anyone who is struggling to pay an HMRC debt should call us. HMRC has an outstanding track record in supporting those who are experiencing genuine difficulty paying their debts, and this approach will continue."

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