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Published on 23 June 2011by Tony Groom

HMRC Insolvency and Enforcement Workload

The HM Revenue and Customs (HMRC) insolvency and enforcement department in

Worthing appears to have an increasing workload.

There are several reasons for this. Businesses are continuing to withhold payment of

PAYE and VAT liabilities, hanging on to the cash and using it to prop up their

businesses. Fewer Time to Pay (TTP) arrangements are being approved with HMRC

who have tightened up the terms for agreeing deferred payments. A lot of TTP

arrangements that have been running for some time are failing. And HMRC have

resumed using seizure and distraint as a common method for collecting overdue tax.

In view of the increase in enforcement activities referred to above, HMRC are issuing

large numbers of Winding Up Petitions (WUPs). Their Petitions dominate the

Companies Winding Up Courts with the weekly list of hearings getting much longer.

The only options for saving a company with a Winding Up Petition are either paying

the undisputed amount due or a Company Voluntary Arrangement (CVA). The

Courts are generally happy to adjourn the Petition at the first hearing for a WUP, to

allow time to either pay the bill or propose a CVA. However the Registrars who

preside over the Companies Winding Up Courts have adopted a hard line at the

second hearing when a further adjournment is sometimes sought.

Companies often complain that the insolvency practitioner who is advising them has

failed to draft the CVA when more likely they have not paid the necessary fee for

proceeding with the CVA.

As a result at the second (adjourned hearing) the Registrar approves the WUP,

especially if the petitioning creditor, normally HMRC, says that it will not support a

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CVA. Not only is it common that no progress been made with the CVA proposal but

often no one has contacted HMRC as the petitioning creditor to keep them advised

of what is going on.

In early May K2 observed that there was a significant increase in the number of WUPs

and predicted that this will rise further following the 19 May deadline by when P35s

(Annual PAYE Returns) had to be filed with HMRC.

It is not yet clear whether the upsurge in HMRC Worthing’s activity relates to the

traditional increase in company failures that has taken place after the last few

recessions when the market begins to grow, or whether the downturn is continuing

and companies are just not able to hang on any longer.

In spite of the harder line over TTP arrangements, there is considerable evidence that

HMRC are supporting the rescue of companies via CVAs. They are expecting CVAs

to be realistic with proposals demonstrating fundamental change to ensure survival

rather than continuing the old business model with yet another deferred payment

proposal.

It is however imperative that the directors of a company in difficulties act urgently if

they want to save their company by proposing a CVA, and that they or their advisers

keep HMRC fully informed.

We are not Insolvency Practitioners. We operate within the law to protect our clients and their wealth. Our team has worked for over 20 years to help stabilise and return hundreds of businesses to profitable growth. Once appointed, Insolvency Practitioners do not work for you, they work for creditors and use your company’s assets to pay themselves. We work for you, not creditors.

More Free Resources for Directors and Business Owners in Difficulty www.rescue.co.uk

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