The dangers of putting off tax debts have been illustrated in the case of yet another firm to come to SFP for insolvency advice.
With times currently tough for UK businesses, it is often tempting to put off payments to creditors you think might be more understanding than others.
However, while some might assume that Her Majesty’s Revenue & Customs (HMRC) is a soft touch and could let firms go longer without paying in order to afford them some breathing space, it is important to remember that times have changed.
With the government cutting public spending budgets left, right and centre, it has also looked at ways of maximising its income.
This includes making full use of HMRC’s tax collecting powers to ensure that the right people and organisations pay the correct fees on time.
The tax body has been exercising its right to chase down those who have not paid their debts and has been able to secure winding up orders against a number of enterprises.
Many of the firms who owe substantial amounts to the taxman could benefit from the help of insolvency practitioners in order to resolve the situation without the business being completely destroyed.
One such enterprise is Ecolite Limited – a company offering various computer services from its headquarters in Chipping, Gloucestershire.
The firm enjoys a healthy annual turnover of £1 million per year, but has run into fiscal difficulties after running up debts of £80,000.
These debts reportedly include a substantial amount owed to HMRC and have caused the firm to slip into administration.
Insolvency practitioners SFP have stepped in to help, with Simon and Daniel Plant named joint administrators earlier this month.
Both men are licensed members of the Insolvency Practitioners’ Association and will use all their skills and experience to bring the situation to a satisfactory conclusion.
However, SFP is concerned that approximately four out of every five instructions it has received in 2011 have been from firms citing debts to HMRC as a reason for their struggles.
It has issued a warning to companies that they should bear in mind that they should keep enough money aside to cover their tax bills in order to stay afloat.
Simon Plant added that Ecolite’s predicament should act as a warning to others.
“Provisions should always be in place for the tax bill so businesses can avoid pitfalls like this,” he said.
“Ecolite has run into cashflow difficulties and we are currently in discussions with various interested parties for a sale of the business as a going concern.”
Another example of a firm requiring SFP’s insolvency practitioners to step in is windows, doors and double glazing manufacturer and installer Profix Limited.
A large chunk of the £750,000 it owes to creditors is to HMRC and the business has now entered administration as a result.
“Profix has run into cash flow difficulties and we are currently in discussions with various interested parties for a sale of the business as a going concern. The construction sector is extremely competitive in the current economic climate with major building firms putting a squeeze on suppliers and margins,” Mr Plant noted.
“Put simply, there are too many businesses chasing too little business. We are actively exploring options and hope for a successful conclusion [to the Profix problem].”