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HMRC is increasing pressure on companies with overdue debts

In 2016, 2,065 winding up orders were made on petitions issued by HMRC (up from 1,944 in 2015).

UK Businesses owed £1.8 billion in late corporation tax for the year 2015/16, a 15% increase from the previous year and this is expected to increase further for the year 2016/17 tax year.  Even without taking in to account PAYE and VAT liabilities, this is a huge (and increasing) number and it is not really surprising that many business owners would have noticed HMRC becoming increasing efficient in chasing overdue debts.

Many small business owners simply do not have the means available to have cash sitting there to get through the peaks and troughs of normal trading and many have experienced cashflow issues previously.  During tough times and with limited funds, HMRC are often pushed to the bottom of the queue of payments and as such the liabilities build.  “Time to Pay” arrangements are not always easy to agree, especially if the company has had a poor compliance history in late filing of returns or failing to making payments on time.

HMRC are taking other action to recover amounts owed which goes beyond the issuing of the usual threating letters. HMRC are using other methods to recover overdue tax, from the issuing of penalties to asset seizures.  Worst case scenario for business owners with outstanding HMRC liabilities would be the closure of their company.  If liabilities remain unpaid HMRC can issue a winding up petition which forces the company in to compulsory liquidation. The only way to stop the action once it has started is to get the petition dismissed, which would be costly.  This involves not only paying the original debt but also any other costs HMRC have incurred in issuing the petition.  If the company had been unable to pay the debt previously, it is unlikely it would be able to after receiving the petition and as such the company would be placed in to compulsory liquidation.

It is important for business owners to understand where potential cashflow issues may arise before it ever happens.  Getting a good business plan in place and regular review of the company’s finances are important as well as keeping an eye on external factors that may affect future sales.

It is not always possible to foresee issues and therefore business owners need to act quickly when problems do arise to prevent liabilities to HMRC and other creditors from mounting.

The headaches and costs to business owners of ignoring cashflow issues could be significant.

I suggest that any business owner seeks advice when they initially see there is or could be a potential issue.  It is much easier to rescue a viable business the earlier these issues are addressed. If you would like any advice, please contact us.

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