HMRC Shifts Focus to UK Regions

• Figures show increased use of legal powers against Scottish and Northern Irish businesses 

Information obtained by the firm under the Freedom of Information Act has shown that the number of petitions for bankruptcy filed by HMRC in Scotland has increased by 97% over a three year period. Further, the number of winding up orders issued by HMRC against businesses in Scotland has jumped by 75%.

Elsewhere, the number of winding up orders successfully obtained by HMRC in Northern Ireland has gone up by 55% in the past three years, while the use of petitions has increased by 17%.

Pinsent Masons says that the figures are striking given that the use of similar legal powers in England & Wales has actually decreased over the same period.

Pamela Muir, a Director in the Insolvency and Restructuring practice at Pinsent Masons, says that the figures show a "clear change in emphasis at HMRC".

"We are definitely seeing a hardening in attitudes at HMRC. During the downturn there was a high level of support for business, but the taxman seems to be running out of patience with those who are unable or unwilling to settle their unpaid tax bills", says Muir.

"Where HMRC can see you have a robust business plan and a strong order book there is still some leniency. In the absence of either, the chances of being granted a reprieve under the Time to Pay regime are increasingly slim."

Pinsent Masons says that the contrasting trends in England and Scotland can probably be explained by a greater level of leniency for businesses North of the border during the downturn.

Muir says, "In many cases businesses have been given time to trade their way out of trouble, but they are now hearing the sound of chickens coming home to roost. The message from HMRC is clear – if you have been given time to settle your tax affairs but have been unable or unwilling to do so, there will be no second chances."

She continues, "HMRC has got to be pragmatic. On one hand a functioning business is good for employment and the overall tax take. On the other, the government cannot afford to let unsustainable businesses go under without settling their tax affairs, as that would inevitably hit the public purse. It's an incredibly difficult balance to strike."

However, Muir also says that Petitions are increasingly being used as a 'tactic' to bring debtors to the negotiating table rather than force them to the wall.

The news comes just weeks after it was revealed that HMRC has massively increased their use of powers that allow them to seize the assets of late-paying businesses in urgent efforts to increase their tax take.  In the last two years, the number of occasions when HMRC has used its powers of distraint to seize the assets of late-payers - overwhelmingly businesses - has increased more than four-fold, rising to 7004 in the last year (twelve months to April 2011), up from 1,675 cases two years ago (year ending April 2009).*