BusinessBusiness RecoveryExperts round on insolvency plans

Experts round on insolvency plans

The clamour against changes to the way companies in administration are taxed continued to grow this week, with experts warning that they would lead to more insolvencies.

Link: IPs lament corporation tax

Practitioners said that by introducing corporation tax on gains and profits made in administration, Gordon Brown was effectively kicking companies when they were down.

Chris Laughton, director of business recovery at Numerica, said: ‘The government is causing more insolvencies by taxing companies that…were not profitable.’

He said banks were likely to cut troubled companies less slack by moving to realise assets rather than see their value eroded by tax liabilities in administration.

Insolvency practitioners are angry that the changes, which mean ordinary creditors are paid only after corporation tax has been levied on gains, were ‘slipped’ into the 2005 Budget rather than as part of the overhaul of insolvency procedures under the Enterprise Act.

R3 president John Verrill claimed the government was guilty of sleight of hand, saying: ‘So much for the abolition of crown preference.’ He added that, thanks to the changes, banks would frequently opt for other procedures.

The Inland Revenue claimed there was no evidence of an adverse effect on the success of administrations, but said it was leading a working group that is taking representations on the changes.

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