HMRC applied to shut down 4,160 businesses in 2018
Funding Options has shared their insights with Accountancy Age
According to Funding Options, HMRC applied to shut down 4,160 businesses in 2018, due to these UK businesses having “fallen behind” on their tax payments last year. Funding Options has cited that HMRC has been too aggressive in their approach when shutting down businesses.
Funding Options stated: “The high number of applications to shut businesses is especially concerning, given the tough trading conditions caused by Brexit uncertainty and slowing economic growth.”
“HMRC continues to take a hard-line approach, despite businesses facing tough economic headwinds,” said Conrad Ford, CEO of Funding Options.
He added: “While HMRC has eased back from last year, when they tried to shut down 4,700 businesses, it should be looking to give them even more leeway.”
“HMRC will close businesses if they think that’s the best way to get the money they are owed, so business owners must have an action plan ready.”
There are ways for HMRC to be more sympathetic to smaller businesses that are struggling, instead of immediately applying for the liquidation of these SMEs.
One example of this is the ‘Time to Pay’ scheme—this gives taxpayers the ability to spread their overdue tax payments over longer periods of time. It was a method that was popular when helping to guide SMEs through the last recession.
Funding Options said: “Winding up petitions are used by HMRC to shut down a business that has not been able to pay its bills on time. HMRC is able to liquidate a business’ assets once it is wound up, which it can then sell on to cover the outstanding tax owed.”
“In an ideal world, small businesses would be paid in good time by their clients, meaning that they have less trouble meeting their tax obligations.”
One of the key reasons why some businesses are not able to immediately meet their tax payments on time is due to late incoming payments from their larger clients.
With tax bills such as VAT and corporation tax, the taxpayer is billed on the money invoiced, rather than the overall money received.
“HMRC will close businesses if they think that’s the best way to get the money they are owed, so business owners must have an action plan ready,” said Ford.
“If a business is able to identify the finance options available to them as early as possible, it is less likely to run into HMRC-related difficulties if they do arise.”
He continued: “In an ideal world, small businesses would be paid in good time by their clients, meaning that they have less trouble meeting their tax obligations. However, this is not always the case, so businesses must be prepared and know how they are going to manage their finances through the tricky periods.”
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It is important that SMEs should look for ways to improve their cashflow management to help avoid HMRC’s sanctions, for HMRC has the power to both ban company directors and seize business assets.
“If a business is able to identify the finance options available to them as early as possible, it is less likely to run into HMRC-related difficulties if they do arise,” Funding Options advised. “Alternative business finance is available that can be arranged quickly—often within 24 hours.”