HMRC Makes it Harder to Rescue Businesses than Wind them Up

Well its official! A recent survey by the insolvency industry trade body R3, has revealed just how helpful insolvency practitioners find HMRC in company rescue situations. 54 percent of the insolvency practitioners questioned felt HMRC made it more difficult to rescue businesses than to wind them up.

HMRC, which always professes to be on the side of struggling businesses, was reported to be particularly unhelpful in insolvency procedures. 71 percent of insolvency practitioners said HMRC has made the insolvency process more difficult to manage in the last few years, while only 10 percent said HMRC was ‘helpful’.

The survey’s findings

These were not the only findings that were less than complimentary for HMRC. Half of the survey’s 350 respondents said HMRC is one of the creditors they look forward to working with the least. Just 8 percent said HMRC is the creditor they like working with the most.

There were also complaints about the amount of time it takes HMRC to close a case. Some 54 percent of insolvency practitioners said they had to wait over three months for clearance from HMRC to close their case. 25 percent had to wait between six months and a year.

The efficiency of HMRC was also questioned, with IPs estimating that a third of the 480,000 letters and forms they send to HMRC are duplicates of lost or ignored post. There are also copies of letters that have to be sent to multiple HMRC addresses. This is the equivalent of approximately 160,000 excess forms and letters a year.

The insolvency practitioners’ final gripe was HMRC’s high rejection rate of requests for information, with over four in ten IPs saying their information requests were rejected.

Hampering business rescue culture

As a government agency, there’s a lot more HMRC could be doing to promote business rescue culture. Currently, HMRC is proving to be more of a barrier to company rescue solutions like company voluntary arrangements (CVA) and pre-pack administrations.

HMRC is often responsible for lengthy paperwork delays, creating additional costs for the insolvency profession and potentially other creditors. It also lacks the commercial decision-making capabilities to agree job rescue proposals within a suitable timeframe.

This general lack of responsiveness is highlighted by the trouble many businesses and IPs have when trying to get in touch with HMRC. 49 percent of the IPs canvassed in the survey said they had to wait more than 15 minutes for the phone to be answered the last time they called HMRC. Worse still, a quarter of the IPs had to wait over 30 minutes.

It’s time for reform

The government has a great opportunity to reform the current system. The shift from regional sites to a smaller number of ‘tax hubs’ is the perfect time to create a specialist insolvency unit. This would help to iron out some of the problems IPs are currently experiencing and improve the accountability and efficiency of the process.

Phillip Sykes, president of R3, said: “Like the rest of the government, HMRC does have to operate under tight budgetary constraints. These can limit the time it can spend on a relatively small but highly technical and very important area such as insolvency.”

HMRC estimates that it currently loses up to £4bn a year as a result of insolvent businesses and individuals who are unable to pay their tax bills. Sykes continued: “The better the government gets at working with the insolvency profession when taxpayers become insolvent, the more chance it has of shrinking the tax gap.”

How can we help?

If you are concerned about the future of your business and don’t know how you’re going to pay your company’s debts, we can help. Our company rescue specialists have considerable experience negotiating with HMRC, and can usually resolve your company debt issues quickly and safely. For a free initial consultation, please get in touch with our team.


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