Top Service News
HMRC Coming Down Hard on Unpaid Tax Debts
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New data from Mazars, the international tax firm, shows that HMRC tried to shut down 440 limited companies in the last quarter of 2022 over unpaid tax debts, a 46% increase from the 301 that it tried to close the previous quarter.
Michael Pallott, Partner at Mazars, says that the number of winding-up petitions can be expected to rise as HMRC increasingly abandons pandemic-era forbearance and returns to more normal levels of debt enforcement activity. HMRC had been prevented from issuing winding-up petitions by the Government’s moratorium on winding-up petitions enacted during the pandemic. This moratorium was lifted in March 2022, allowing HMRC and other creditors to pursue businesses that owe them money. HMRC is feeling the pressure after it was recently criticised by the Commons public accounts committee for failing to collect an estimated £42 billion in unpaid tax.
Pallott said: “HMRC understandably needs to recoup money that the taxpayer is owed, however, given the negative economic outlook, the increase in winding up petitions from HMRC is likely to see more businesses forced to close their doors.”
Pallott adds that HMRC is willing to negotiate with businesses who have a genuine reason for being behind with their payments and wish to negotiate in good faith but early communication is vital. Under certain circumstances, businesses can apply to the tax authority for Time to Pay arrangements, giving them an extended period in which to pay back their debts. HMRC currently has 823,000 Time to Pay arrangements in place.
Emma Reilly, MD of specialist credit management company, Top Service Ltd, commented on the impact on UK construction businesses “We are seeing an increase in winding-up petitions being presented to construction companies, not just by HMRC, but by trade creditors too. We would advise businesses with cash-flow difficulties to keep the lines of communication open with creditors to try and prevent a situation escalating to the winding-up petition stage”.