News
Danny McCance 15 Jan 2018 09:39am

Tax debt liquidations on the rise

In the last five years, the number of businesses being liquidated with debts from taxes has risen by 6%, and is higher than any point since 2012

Despite the number of overall compulsory liquidations falling by 40% in the same period, the number of liquidations in which HMRC was creditor has increased, according to Enterprise Tax Consultants who conducted the research.

The figures, obtained by the Insolvency Service following a Freedom of Information request, show that HMRC was a creditor of 2,605 of the 2,955 compulsory liquidation cases in 2016-17. Of those, it was the largest creditor for 1,920 of them.

The estimated total debt owed to HMRC in this period was £830m, down from £883m in 2012-13, with the mean debt owed at £319,000 and a median average of £42,000.

“Some might be tempted to view the numbers as positive in that they demonstrate a significant drop in the number of compulsory liquidations, but the figures become significantly less so when one considers debts owing to HMRC,” said Andy Wood, technical director of Enterprise Tax Consultants.

He pointed towards the increasing frequency in which HMRC is named as a creditor as a concern.

“The total amount claimed by HMRC has risen by almost 50% in the last year alone.”

Even when discounting the small number of large debts, skewing the figures, he still pointed to the median increasing by half in five years.

In response an HMRC spokesperson said, “The fluctuation in insolvencies is not due to any single cause but a range of factors.

“HMRC will always offer practical support to viable businesses and there are over 1.5 million time to pay arrangements in place at this time supporting British business.”

In October last year, HMRC revealed it had a tax gap – the gap between the tax due and tax collected – of £34bn, its lowest in 10 years.

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