HMRC has become more aggressive in its enforcement and collection processes
There has been a significant increase in the number of Winding Up Petitions being issued by HM Revenue & Customs (HMRC). A Winding Up Petition is a legal notice put forward to the court by a creditor – in this case HMRC – which, in effect, asks the court to liquidate the company as they believe the company is insolvent and cannot pay its debts. 348 Winding Up Orders were granted on the basis of petitions presented by HMRC in July 2023, which is the highest number since before the Covid -19 pandemic, as it looks to reduce its tax debt balance, which is over twice as high as it was since before lockdown.
In this article, we look at why HMRC has become more aggressive in its enforcement and collection processes, against the background of company insolvencies being at their highest level since 2009 (source: Insolvency Service data, Q2 2023), and how our Insolvency Practitioners can help.
The more aggressive stance of HMRC
The Winding Up protection measures introduced during the pandemic started to be phased out from 1st October 2021 and were completely removed on 1st April 2022. Since then, HMRC has been more active with demands for repayment of tax money owed to it, as it looks to restore the nation’s finances. Government figures show that HMRC’s tax debt reached close to £50 billion at the end of 2023 and was still high at c.£46 billion at the end of Q1 2023. This compares with a balance of about £20 billion before the pandemic – hence the growth in Winding Up Petitions.
HMRC is also known to have restricted its discretion with time-to-pay agreements, where struggling companies are allowed to make their payments in instalments. Although the number of time-to-pay agreements negotiated with struggling companies rose by 20 per cent in the first quarter of 2023 compared with Q4 2022, HMRC is currently more supportive of companies with a strong underlying business that is worthy of the support a time-to-pay arrangement can give it, rather than those which are likely to fail 3 or 4 months down the line.
As more companies are finding out, the decision to issue a Winding Up Petition can be made very quickly, usually with the arrival of a letter using the following standard wording from HMRC:
“If you do not make payment, in full, within seven days of the date of this letter I will instruct the Solicitor of HM Revenue & Customs to present a petition to the High Court to wind up the company without further warning, on the grounds that the company is unable to pay its debts.”
What can Insolvency Practitioners do to help?
We are not just here for the compulsory and unavoidable liquidations. We are also here to help companies in financial difficulties to recover and turn things around, whether that is through restructuring and refinancing or through an insolvency procedure such as an Administration or a Company Voluntary Arrangement which can deliver the breathing space that companies need to get back on the road to recovery.
Our advice is that if you know that the underlying position of your company is weak, then act now! Do not wait until the warning letter arrives from HMRC. And if it does, immediate contact should be made with our Insolvency Practitioners so that we can talk to HMRC to discuss and agree a repayment proposal or Time to Pay as a starting point. We know how they work and what they are looking for.
The sooner you contact a Licensed Insolvency Practitioner, such as those at Antony Batty & Company, the sooner we can recommend a solution. We will talk you through all the options available, so that you know exactly where you are, helping you to make the best possible decisions. The first discussion is free.
In the meantime, if you need our help and advice in any of our specialist insolvency areas, please contact us or call any of our offices, below, for a FREE initial discussion on the phone, on line or over a coffee.
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