Firms entering insolvency rockets 41% in a year

ACCOUNTANCY FIRMS entering insolvency processes have increase 41% in a year, according to research from specialist lending business.

Syscap, using Companies House data, found that 103 firms became insolvent in the last year, up from 73 the year before.

High street firms have been hit hard this year, with a crackdown on tax planning and micro entity auditing.

Following revelations that large corporates, such as Starbucks, Amazon and Google, had used tax planning strategies to cut their corporation tax payments, firms found they were unable to put them forward for their clients, over fears of public backlash and a crackdown by HMRC.

Audit also changed for micro-entities, previously businesses with less than £6.5m turnover and a minimum balance sheet of £3.26m could opt out of having an audit. However, now companies are exempt if they meet two out of three qualifying criteria – a balance sheet of less than £3.26m, turnover below £6.5m and fewer than 50 staff.

Syscap CEO Philip White (pictured) said: “Like law firms, larger accountancy firms have also suffered from the collapse in M&A and corporate finance work. Accountants have been hit as a result of government policy – most notably the exemption of an ever increasing number of businesses from the need to get an audit done.”

“It’s understandable that companies and individuals want to find ways to cut costs by skimping on professional fees but in the end it can be a false economy. Mistakes in cash flow forecasts or in tax returns can cost dear and a lack of a full audit can mean that errors and irregularities aren’t picked up.”

Syscap has launched a specialist funding partnership with the ICAEW to help the institute’s members.