Massive debts owed to the taxman are the likeliest cause of future company failures, according to figures from one of the country’s leading insolvency firms.
Nearly three out of every four instructions currently received cite Her Majesty’s Revenue & Customs (HMRC) as the largest single creditor at the point that a company enters administration says Simon Plant, a Partner at SFP.
And this number could rise still further as companies who took advantage of the Government’s ‘Time To Pay’ initiative have failed to make provision for their future tax liabilities: “Time To Pay is the ticking time bomb that no-one wants to mention,” Simon says.
“But with HMRC now quite literally ‘calling in their debts’, those that have failed to accrue for those debts or naively believe they will be given more time are in for a rude awakening.”
Simon says there is a clear trend developing in recent appointments with the amounts owed to the taxman ranging from £125,000 to nearly £500,000: “These are quite extraordinary sums of money,” he says, “that seriously impact on cashflow and not infrequently lead to a company’s collapse without professional help.”
He is similarly concerned about the size of businesses now failing or entering administration, and in particular the amount of jobs being lost or under threat: “The economic downturn seems to be affecting all manner of businesses from printing companies to recruitment agencies, but it is the SME sector with relatively modest turnovers employing 40 or 50 staff that seem to be suffering most.
“The larger companies are the ones that of course attract the headlines, but the hidden tragedy lies within the SME community.”
Recent examples include:
Notes to editors:
Time To Pay (TTP) arrangements allow HMRC to collect tax in a cost effective way. They allow viable customers who cannot pay on the due date to make payment(s) over a period that they can afford. Arrangements are tailored to the ability of the customer to pay and are typically for a few months although they can be longer. TTPs lasting over a year are only agreed in exceptional cases. Most arrangements involve regular monthly payments being made but in exceptional cases may involve a short period of deferral.
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