HMRC makes it harder to rescue businesses than to wind them up, according to a survey of the insolvency profession by trade body R3.
More than half (54%) of insolvency practitioners believe that the revenue’s processes and behaviour make it harder to manage insolvency processes and rescue businesses, while 71% of insolvency practitioners say that HMRC has made the insolvency process harder to manage in the last few years.
Only 10% said HMRC was ‘helpful’ when it comes to business rescue.
HMRC estimated that it loses up to £4bn a year as a result of insolvent businesses and individuals being unable to pay tax bills. This is equivalent to just over 10% of the total ‘tax gap’.
Promoting the study Phillip Sykes, president of R3, said that he believes recently announced planned changes to HMRC represent an opportunity to help insolvency practitioners, government and the economy as a whole.
“The government, as a creditor, can do much more to help promote a business rescue culture”, said Sykes. “At the moment, it can be responsible for lengthy paperwork delays, and creates extra costs for itself, the insolvency profession and other creditors, while its lack of commercial decision-making capabilities undermines business and job rescue proposals.”
Sykes went on to call for a specialist insolvency unit to be created, stating that its planned shift to a smaller number of centres gives HMRC the opportunity to create such a division, which would “cut duplicate post, have more consistency in its decisions, be more accountable, and be far more efficient.”
He added that in order to tackle the much-publicised ‘tax gap’, the government needs to learn how to work better with insolvency practitioners. “The insolvency profession finds dealing with the government hit-and-miss”, he said. “Insolvency practitioners are sometimes denied tax information to which they are entitled as an Office Holder.
“HMRC’s approach to approving voluntary arrangements changes depending on who the insolvency practitioner speaks to. Letters and forms can go unanswered, requiring follow-ups, while insolvency practitioners can wait months before HMRC responds to requests to wrap-up cases.
“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.
“But it’s not only the government’s losses that are affected; it would be ordinary creditors’, too. Delays with post or paperwork and intransigence on business rescue hurt other creditors as well. The more efficient the government becomes the more money gets back to other creditors.”
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