HMRC takes tougher line on bankrupts

HM REVENUE & CUSTOMS has been making life tougher for businessmen that have entered into a bankruptcy proceeding, a City law firm has warned.

Wedlake Bell raised the issue businessmen are facing tougher sanctions from HMRC for their unpaid taxes, The Independent reports.

In the last 12 months the Insolvency Service obtained 443 bankruptcy restrictions orders, (BROs) up 21% on the previous year. BROs extend the length of time a person must stay in the insolvency procedure.

Usually following a court application a judge will declare a person bankrupt and allow them to be discharged from the process after about 12 months.

However, a bankruptcy restriction order can extend the discharge for between two and 15 years. Usually a court will issue the restriction if it concludes a person's reckless or dishonest behaviour led to their insolvency.

Four years ago, just 80 such orders were issued in a year.

Edward Starling, head of business recoveries at Wedlake Bell, said: "The authorities are making an example of business owners who have allowed their businesses to run up insurmountable tax debts by banning them from involvement in senior management positions of a company for a long time."

Update:

An HMRC spokesman said: "HMRC doesn't initiate insolvency action lightly, but we will not hesitate to do so when that is the right way to protect the country's tax revenues and other creditors from those who trade whilst insolvent and run up debts that they simply cannot pay."