Failed businesses are coming under increasing pressure by HMRC to find a way to pay off tax arrears, and bankruptcy can no longer be considered as an easy escape route, as the Revenue are taking a more forceful position with such businesses.
Personal bankruptcy is sometimes viewed as a way to make a fresh start but because of HMRC's change in attitude the long-term consequences will have to be given serious consideration before making the decision to jump.
In the year ending 31st March 2011, bankruptcy restriction orders or similar undertakings to limit access to credit were successfully obtained against 443 sole traders and partnerships that had all gone under. Many of these had been accused of failing to fulfil their tax obligations. This figure is 21% up on the previous 12 months.
HMRC is no longer a preferential creditor and is normally the last creditor to be paid when a business goes belly up.
With the need to stoke up the public coffers, however, HMRC are sending out a tough message to struggling firms that, if they allow their business to collapse without paying their taxes, they cannot expect sympathy.
A Revenue spokesperson was keen to point out that HMRC do not “initiate insolvency action lightly” but “will not hesitate…when that is the right way to protect the country's tax revenues and other creditors from those who trade while insolvent and run up debts that they simply cannot pay.”
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