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Revenue getting tough with bankrupt firms

07 September 2011
Categories: News , Admin
Warning as number of restriction orders increases

Bankruptcy can no longer be regarded as a way to negate tax liabilities as failed firms come under greater pressure by authorities attempting to raise additional revenue for the public purse, a City law firm has warned.

HMRC are taking a more forceful position in their dealings with failed small businesses that do not pay their taxes in full, according to Wedlake Bell, citing figures from the Insolvency Service.

In the year ending 31 March 2011, bankruptcy restriction orders or equivalent undertakings intended to limit access to credit were obtained against 443 sole traders and partnerships that had gone bust – the majority having been accused of consistently failing to fulfil their obligations to the taxman. The figure represents an increase of 21% on the previous 12-month period.

‘Personal bankruptcy is sometimes regarded as a means to a fresh start,’ said Edward Starling, head of business recoveries at Wedlake Bell.

‘But with HMRC… taking an increasingly tough stance, it would be very dangerous to underestimate the long-term consequences of being an owner of a bankrupt business.

‘The authorities are making an example out of business owners who have allowed their businesses to run up insurmountable tax debts,’ added Mr Starling.

‘The Revenue is typically the last creditor to get paid where a business goes bust. Given the state of the public finances, the government is keener than ever to minimise any non-payment of tax, and HMRC will want to send a strong signal to the owners of struggling firms that if their businesses collapse without paying tax, they cannot expect any leniency.’

A spokesperson for the Revenue insisted the department ‘doesn’t initiate insolvency action lightly’, but added it ‘will not hesitate... when that is the right way to protect the country’s tax revenues and other creditors from those who trade while insolvent and run up debts that they simply cannot pay.’

Categories: News , Admin
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