More contractors are facing financial difficulties due to the pandemic, Brexit and recent changes to IR35 rules.
Many contractors have seen a reduction in business over the last few years. Limited company contractors also did not benefit from most of the government support offered to employees and self-employed people during the pandemic. So it should come as no surprise that more contractors are finding it tough to deal with rising debts.
In the absence of grants and meaningful furlough payments, most limited company contractors turned to government back loans to see them through the pandemic. These loans helped many at the time, but many contractors have not seen their businesses bounce back before repayments kick in in May 2021.
Many contractors struggling with rising debts have little option but to either borrow more money and hope for a sharp turnaround in fortunes or accept insolvency.
Insolvency is not the end of the world for contractors. If you handle it properly, you can let go of debt worries, satisfy creditors and return to business at a later date if you so wish.
If your limited company is insolvent, then one course of action open to you will be to pursue a Creditor’s Voluntary Liquidation (CVL).
A CVL is a formal insolvency procedure where the director voluntarily chooses to bring their business to an end. A Licensed Insolvency Practitioner will officially close the company and liquidate assets to help pay back creditors.
While it is voluntary rather than compulsory (which can happen if a creditor forces you to cease operations), a CVL usually follows many months of financial hardship.
Some benefits of a CVL include:
You should always seek professional advice before pursuing insolvency action. A Licensed Insolvency Practitioner will be able to advise you on what the best course of action is likely to be best for your situation.
For more information about contractor insolvency and if a CVL could help, speak to a team member today. Call: 0800 611 8888.