By Tim Corfield
A recent survey carried out by R3 (the trade body of the insolvency professionals) into the dealings of insolvency practitioners with HMRC makes for some very disappointing reading.
Some of the major findings of the survey were;
• 71% of IP’s say that HMRC have made the insolvency process more difficult in recent years – only 10% said that HMRC were helpful.
• Over half of IP’s say that HMRC make it harder to rescue a business than to wind it up.
• IP’s believe that one third of the estimated 480,000 items of correspondence sent to HMRC in a year are duplicates of lost or ignored post or are copies of letters that are sent to multiple HMRC addresses. So, approximately 160,000 of letters are wasted – together with the time of the IP’s staff in generating these.
• Over half of IP’s had to wait over 3 months to receive clearance from HMRC to close their last case. One quarter of IP’s had to wait between 6 to 12 months.
• Over 40% of IP’s have had their request for information refused, despite the fact that they are office holders, and therefore legally entitled to receive the information requested.
• Around 50% of IP’s have had to wait at least 15 minutes before their call was answered or they were cut off or they hung up. For one quarter of IP’s it was 30 minutes. (Accountants would not be surprised with this finding!)
HMRC estimates that it loses up to £4 billion per year as a result of insolvent businesses and individuals being unable to pay their tax bills. It would seem to make sense that HMRC would get significant benefits from working more closely with IP’s.
The government has recently announced changes to the HMRC structure which present an opportunity for reform. Phillip Sykes, president of R3 says “the government, as a creditor, can do much more to promote a business rescue culture. At the moment, it can be responsible for lengthy paperwork delays and creates extra costs for itself, the insolvency profession and other creditors, while its lack of commercial decision making capabilities undermines business and job rescue proposals”.
From our experience there are serious inconsistencies being operated by HMRC – CVA and IVA decisions, time to pay agreements, issues of winding up petitions – to name but a few areas.
HMRC have inevitably taken on a role to ‘police’ businesses and certain business people as have the banks. But, it’s generally the small traders that are taken to task by the powerful institutions.
We certainly agree that it is unfair on a business that pays its taxes on time (without question) to have to compete with a competitor that has agreed with HMRC an extended time to pay arrangement (for example). There needs to be some sort of joined up policy, including the insolvency service with documented guidelines and policy notes. Is it likely to happen?
It is inexcusable that these basic inefficiencies are so common with HMRC. The government is constantly increasing regulation and transparency upon our industry. Yet, the work we need to do is made more difficult by HMRC – effectively passing out inefficiencies to the private sector, which cannot be recovered. Let’s see what the reforms bring.
Griffin and King are leading Insolvency Practitioners in Stoke offering advice and solutions for businesses in financial difficulty. Contact us now – the sooner you do the sooner we can help.