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The number of companies pursuing insolvency action in January 2021 was more than half the corresponding number for January 2020, despite the impact of the coronavirus pandemic.
Just 752 registered company insolvencies took place in the first month of this year, down from 1,515 in the same month in 2020.
The Insolvency Service, which monitors these figures, suggested that government support was playing a key roll in keeping businesses afloat during the pandemic. They said: “This is likely to be partly driven by government measures put in place in response to the coronavirus (COVID 19) pandemic.”
Key government support measures include:
- Temporary restrictions on the use of statutory demands and winding up petitions (which can lead to compulsory liquidations)
- Tax exemptions such as business rates holidays for certain businesses
- Government grant and business loan support, including the Bounce Back Loans scheme
- Government support for individuals, including income support schemes
Colin Haig, President insolvency and restructuring trade body R3 said: “January’s fall in corporate insolvency numbers has been driven by a fall in Creditors’ Voluntary Liquidations, administrations, and Company Voluntary Arrangements.
“These figures don’t reflect the fact that the economic fallout from the pandemic is continuing to hit businesses, individuals, and the wider economy. It’s clear the government’s support packages – which were extended again in December – are helping prevent the rise in insolvency numbers we would have expected to see in an economic climate like this one.
“However, the support packages and bans on creditor enforcement actions can’t last forever. We hope that the Chancellor will use his Budget on 3 March to outline how they will be wound down in an orderly manner in the medium term, and how businesses, staff, and the self-employed will be supported during this period.”
Tom Fox, Licensed Insolvency Practitioner at Umbrella Insolvency suggested that the coronavirus pandemic could have turned the traditional insolvency calendar on its head.
He said: “Ordinarily, we would expect to see a sharp increase in insolvencies in the first three months of the year. Coronavirus and the associated restrictions, however, look to have changed this reality.
“Even with the government’s roadmap for opening the economy, there is still a high degree of uncertainty over what the future will look like. And with many businesses close to the brink, we will wait to see how many can return to full strength when support is eventually withdrawn.”
Is your business struggling with the weight of business debt? Speak to a member of the team today. Call: 0800 611 8888.