HMRC cracking down on unnecessary insolvencies

Business owners who have sought insolvency advice might have managed to avoid the wrath of Her Majesty's Revenue & Customs (HMRC).

According to London law firm Wedlake Bell, the tax body is coming down hard on those who have entered into bankruptcy proceedings.

Head of business recoveries at the firm Edward Starling noted that HMRC is running out of patience with companies that use bankruptcy as a seemingly easy way out of their fiscal problems.

He noted that the government body is concerned that it will not see money owed to it if firms go insolvent when they could stay afloat given a little effort.

"The authorities are making an example of business owners who have allowed their businesses to run up insurmountable tax debts by banning them from involvement in senior management positions of a company for a long time," Mr Starling told the Independent.

According to the report, the last 12 months has seen the Insolvency Service obtain 443 bankruptcy restrictions orders (BROs), which are enforced if the court believes a person's reckless or dishonest action led to the insolvency.

This represents a 21 per cent year-on-year increase on BRO numbers and means more businessmen will be forced to stay in insolvency procedures for longer.

The usual period before a judge will allow a person to be discharged from the procedure is 12 months, but BROs can push this up to anything between two and 15 years.

An HMRC spokesman explained that the organisation will pursue what it perceives to be a fair course of action when individuals file for bankruptcy unnecessarily.

"HMRC doesn't initiate insolvency action lightly, but we will not hesitate to do so when that is the right way to protect the country's tax revenues and other creditors from those who trade whilst insolvent and run up debts that they simply cannot pay," he said.

Meanwhile, HMRC recently warned that VAT cheats have until September 30th to come clean or face the consequences.