HMRC winding up petitions hit four-year high

More businesses were forced by HMRC to liquidate in the 12 months to September than at any point over the past four years, business advisory group Moore has revealed.

A total of 4,308 businesses were wound up last year following HMRC intervention. This was up 6% on the previous year to September, when 4,073 companies were forced to liquidate.

Any creditor of a business can apply to the courts for a winding-up petition if a sum of just £750 has been left unpaid for longer than three weeks. A winding-up order allows HMRC to liquidate the company and start the process of paying off creditors. HMRC is typically responsible for the majority of winding-up petitions although other businesses that are owed cash can also file an application.

Lucienne Parry, a partner at Moore, said: “Once a winding-up order has been made by the court, there is little that can be done by the business to prevent liquidation, unless you can pay the tax bill. Banks also tend to freeze the company’s bank account during this process, putting a stop to all trading.

“It’s unfortunate timing that, just as the economy struggles, HMRC gets tougher in its debt collection processes and tries to close down more businesses.”

“Everyone appreciates that it is one of HMRC’s jobs to collect any tax owed, but shutting down your debtors and undertaking a fire sale of their assets is only a short-term fix. It is not normally the way to maximise your collections for the long term.”

A spokesman for HMRC said: “We only initiate winding-up action as a last resort, where we believe this is the best way to protect both the interests of other taxpayers and creditors.”

“Anyone who anticipates payment problems should call us as early as possible as we have an excellent track record for supporting those with genuine problems.”

From April, HMRC will be a secondary preferential creditor, and this will likely increase winding-up petitions.

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