Insolvency practitioners say HMRC is an obstacle to corporate recovery

Published on March 11, 2016 by Crawfords Accounting

The majority of insolvency practitioners think HM Revenue & Customs makes it more difficult to achieve corporate recovery than to just wind up a company, according to an R3 survey.

In the research from the Association of Business Recovery Professionals, 54% of insolvency practitioners said HMRC’s influence makes it easier to wind up a company than to recover it.

A disappointing total of just 10% said HMRC are helpful where corporate recovery is concerned, which can be problematic in a large number of insolvency proceedings when the government is involved as a creditor.

Phillip Sykes, president of R3, said: “The government, as a creditor, can do much more to help promote a business rescue culture. At the moment, it can be responsible for lengthy paperwork delays, and creates extra costs for itself.”

However, he added that there is a chance to improve HMRC’s involvement in such proceedings, at a time when the structure of the organisation is changing to create a larger number of smaller branch offices.

This, Mr Sykes argued, would allow for the creation of a specialist insolvency unit within HMRC to improve accountability and efficiency, and the consistency of its decisions.

By doing so, HMRC would not only potentially improve its own recovery of tax owed by insolvent taxpayers, but would also do more to support their other creditors in lodging their own claims.

Each year, around 10% of the ‘tax gap’ – the expected revenues of HMRC that are lost due to non-payment – is associated with insolvency and with taxpayers who simply cannot afford to pay their bill, something R3 believe could be avoided if HMRC were able to work better with those in the business recovery profession.

“The better the government gets at working with the insolvency profession when taxpayers become insolvent, the more chance it has of shrinking the tax gap,” Mr Sykes said.

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