HMRC are getting tough with businesses that default on their tax payments, according to accountancy Wilkins Kennedy, with the department having ramped up its attempt to reclaim debts.
The number of petitions presented by the Revenue to wind-up companies increased by 57% to 5,302 in 2011/12, compared to 3,367 the previous year to 31 March: a clear sign the department will no longer tolerate late payment of tax.
The sympathetic approach HMRC adopted towards struggling firms during the recent recession has been replaced by a hardline stance, claimed Wilkins Kennedy partner Anthony Cork.
He said the Revenue does not want to be seen as lender of first resort – an agency that extends credit to organisations in financial difficulty – and is keen to dispel any belief it is a soft touch.
“The government has placed a lot of extra pressure on HMRC to increase the revenues they collect,” said Cork.
“Ending the sympathetic approach to late payment is an easy option… but it will put many small businesses in very precarious financial positions.”
The jump in winding-up petitions comes as the taxman continues to tighten access to the time-to-pay scheme. The final set of official statistics, published in 2011, showed an increased number of rejected applications.
“Businesses need to be very careful about getting on the wrong side of HMRC,” warned Cork, added that the department has “become increasingly unwilling to compromise in its pursuit of missing taxes”.
The Wilkins Kennedy partner believes the aggressive approach is partly a result of the Revenue’s inadequate management of debts: the taxman has traditionally been poor at intervening early to help struggling firms.
Tax debts too often allowed to “spiral out of control”, claimed Cork, leaving officials with “little choice but to resort to winding-up petitions to recover large amounts” when a “pre-emptive” approach to minimising firms’ tax debts would have been preferable.
