HMRC denies lack of cash for liquidation

HM REVENUE & Customs has denied it has run out of money to pay for insolvency services following a dramatic decline in winding-up orders.

Restructuring practitioners from several firms that undertake work on behalf of HMRC in Scotland have confirmed a marked drop that began in the final quarter of last year.

Most experts believe it is down to a lack of funding, rather than a case of the taxman taking a softer stance on delinquent debts.

“HMRC is under huge pressure to collect the taxes owed to the government, which is why we are hearing about companies finding it increasingly difficult to negotiate a grace period through the ‘Time to Pay’ scheme,” said one of the practitioners.

“I would expect they will start petitioning again in April, when it’s a new financial year with a new budget. That’s unless their whole policy has changed, but I can’t imagine that is the case.”

An analysis of official figures released last week by accountancy firm PFK shows compulsory liquidations falling from a high of 348 in the second quarter of last year to 197 in Q3 and just 94 in the final three months of the year. HMRC is the biggest initiator of such proceedings.

A review of public notices in the Edinburgh Gazette, the government’s official newspaper in Scotland, reveals a similar trend.

After filing 515 petitions to wind up companies in the first half of last year, 
activity by HMRC slowed down, with only 107 Scottish firms receiving such notices in the second half of 2012. The decline was most pronounced in the final quarter, with September’s 18 petitions falling away 
to just one in October, two in November and one in December.

A spokeswoman for HMRC dismissed as “nonsense” the idea that the tax agency has run out of money to wind up companies.

“The number of winding-up petitions fluctuates year on year; the rules on how [we] recover debts have not changed,” she added.

Experts are predicting a renewed surge in compulsory liquidations in the spring.