HM Revenue and Customs has signalled that it will go easy on company debts as businesses recover from the coronavirus crisis.
In a letter sent by business secretary Kwasi Kwarteng said that HMRC will adopt a ‘cautious approach’ to debt recovery on unpaid taxes.
The reassurance comes after a number of business groups expressed concern about a potential wave of insolvencies in the UK this year.
The Institute of Directors and insolvency industry trade body R3 lobbied the government for enhanced protections and support as companies face an uphill battle to recovery.
Thousands of businesses were enjoying protection from creditors guaranteed by emergency legislation, but this protection will start to wind down this summer.
Many companies in financial trouble will count HMRC as a major creditor if they have been unable to pay their tax bills.
The taxman gained preferential creditor status last year, meaning that it can skip the creditor queue and have its debts repaid first when a company become insolvent.
Experts believe that HMRC’s preferential status means that one company’s insolvency could trigger many more if companies cannot recover money.
In the letter seen by FT, Kwarteng said that, for HMRC, “using insolvency to enforce payment will remain a last resort”.
A HMRC spokesperson said: “Protecting livelihoods and keeping people in work remains our priority, as it has been throughout the pandemic.
“We will always work constructively with customers to avoid the need for insolvency and will only take action if a customer does not respond or engage with us.”
Accountants should prepare for a rise in insolvencies
Tom Fox, Licensed Insolvency Practitioner at Umbrella Insolvency, said: “While HMRC may adopt a reasonable approach to debt recovery, it doesn’t change the fact that many businesses have faced significant disruption this year.
“We’re likely to see more insolvencies this year and accountants should plan for how they will use insolvency professionals.”
For more information about insolvency services for companies and accountancy practices, speak to a member of the Umbrella.UK Insolvency team today. Call: 0800 611 8888.