HMRC: Decline in winding-up orders not due policy

THE taxman has denied that there has been a change in its attitude towards company insolvencies, despite figures showing a 70 per cent drop in the number of “winding-up” orders sought through the courts.

Football club Rangers is among firms that have ceased to trade due to tax problems. Picture: Mark Runnacles/Getty Images

HM Revenue & Customs (HMRC) applies to courts for winding-up orders so that it can liquidate firms’ assets in order to recover the tax it is owed.

Figures released today show that HMRC filed only 315 petitions in the year to 31 March in Scotland, down from 986 in the previous 12 months.

Data suggested the fraction of petitions granted by the Scottish courts had fallen by 48 per cent, roughly in line with a 42 per cent fall for the UK as a whole.

Sources within the insolvency sector have repeatedly suggested that HMRC had run out of money to bring court actions last year, a claim denied again and again by the taxman.

Ainslie Benzie, a Glasgow-based senior associate in the restructuring team at law firm Pinsent Masons, which compiled the latest statistics, said: “Clearly we are seeing a significant decline in legal action by HMRC as they seek to make recoveries against Scottish businesses.

“What is less clear is the exact reasons behind it.”

Benzie added: “South of the Border, HMRC seems to have switched tactics and is using statutory powers of ‘distraint’ to effectively seize assets in return for outstanding tax.

“However, we are not seeing remedies equivalent to distraint in Scotland being used – there simply seems to be less enforcement activity going on.

“This may be down to a lack of resources, given the various other high-profile cases HMRC is pursuing, or simply a change in HMRC strategy here.”

Pinsent Masons highlighted that a series of high-profile businesses – including law firm Cobbetts, electricals retailer Comet and Rangers football club – had “ceased to trade following tax problems”.

A spokeswoman for HMRC said: “There have been no changes in HMRC policy on insolvency proceedings, and the rules on how we recover debts have not changed. HMRC’s aim is not to wind up companies but to collect, as efficiently as we can, the debts that are due, using the range of powers available to us.

“HMRC only initiates winding-up action where it believes this is the best course of action to protect the interests of the Exchequer in respect of a particular debt. Therefore, the number of winding-up petitions fluctuates month on month, year on year.

“Anyone who is struggling to pay an HMRC debt should call us. HMRC has an outstanding track record in supporting those who are experiencing genuine difficulty paying their debts.”

In February, HMRC told The Scotsman’s sister paper, Scotland on Sunday, that it had not run out of money to pursue companies through the courts, branding such suggestions from several insolvency practitioners as “nonsense”.

Experts have previously predicted that the number of winding-up orders is likely to have risen again in the spring. Official figures from the ­Office of the Accountant in Bankruptcy for the three months to 30 June are due to be published later this month.