A recent survey conducted by R3, the trade body for Insolvency Professionals, has found that over half of insolvency practitioners (IPs) think HMRC makes it harder to rescue businesses rather than wind them up. Atop of this, nearly 71% feel that the insolvency process has become more difficult in the last few years because of HMRC. Only 10% felt HMRC were ‘helpful’ in the process of business recovery.
IPs are hopeful that the upcoming changes to HMRC will reform the processes and will help promote business recovery. The President of R3, Philip Sykes, has said “the government, as a creditor, can do much more to help promote a business rescue culture… at the moment [it is] responsible for lengthy paperwork delays, and creates extra costs for itself.” He continued adding “its lack of commercial decision-making capabilities undermines business and job rescue proposals.”
Many practitioners feel HMRC is the creditor which they look forward to working with the least, which is problematic considering how often the government is a creditor in insolvency cases. Whilst it is appreciated that HMRC has a budget which it must act within, the budgetary limitations result in insufficient time and attention for areas which require technical accuracy, such as insolvency.
HMRC estimates that it loses up to £4 billion a year as a result of insolvent businesses and individuals being unable to pay their tax bills. Philip Sykes explains that the better the government is at working alongside the insolvency profession, the more likely it will reduce the current tax gap. The more efficient the government is with paperwork, the faster other creditors will get their money back too.