Out-Law News 1 min. read
16 Jul 2013, 9:23 am
HMRC issued 42% fewer winding-up petitions in the last year compared with the previous 12 months, according to new data obtained by Pinsent Masons under freedom of information laws. HMRC issued 3,733 petitions for winding up businesses in 2012/13, the lowest number it has issued in the past five years. It issued 6,440 such petitions in 2011/12, according to the figures.
The data also revealed that the number of successfully obtained winding-up orders fell during the past year from 3,399 to 2,541.
Restructuring law expert Serena McAllister of Pinsent Masons said that HMRC has been using other means with which to claw back money owed to it through 'distraint', the statutory right of HMRC to visit a business premises and seize goods to recover unpaid taxes.
"The figures speak for themselves," McAllister said. "The drop in petitions to wind up companies and place them into liquidation, combined with evidence that suggests HMRC is increasingly using its powers to seize business assets, show that HMRC is now using distraint as its preferred method of enforcement."
"Interestingly, this tactic appears to be paying off as HMRC's recovery rate has increased significantly, which is good news for the taxpayer although not so good news for businesses," she added.
"HMRC is becoming increasingly aggressive in the use of its powers to seize assets in order to recoup outstanding tax. Having lost is preferential creditor status, distraint allows HMRC to effectively jump to the front of the queue of creditors and obtain priority in respect of those seized assets. For some companies, particularly SMEs, the seizure of its assets could be the final blow and may even force businesses into insolvency in some instances," McAllister added.
Changes to insolvency law introduced in 2003 abolished HMRC's own status as a preferential creditor, meaning that unpaid taxes are now treated in the same as other unsecured debts when a company goes into administration.
