As COVID-19 debt continues to mount for some companies, Kwasi Kwarteng, the UK Business Secretary has promised HMRC will adopt a ‘cautious approach’ on collection of tax arrears built up during the pandemic – a lifeline for many companies, particularly those with accrued debt and low cash reserves.
The announcement has been made in response to warnings issued by business groups, including the Institute of Directors and restructuring body R3, who suggested there could be a wave of insolvencies over the summer if appropriate measures were not put in place to help companies emerge the other side of the pandemic.
“Now is not the time to adopt an aggressive approach”
Michael Roome, Business Recovery and Insolvency Partner and licensed Insolvency Practitioner here at Smith Cooper reflects “Although the remaining government support measures are to be withdrawn in the coming months, trading remains supressed for certain sectors, which has raised serious concerns amongst recovery professionals and business owners. The COVID-19 pandemic has caused lasting damage to some sectors which will take time to recover from.”
“This more cautious approach as promised by the Business Secretary is absolutely crucial to the survivability of some companies.”
“The COVID-19 pandemic has no doubt placed existential strain on the economy, but now is not the time to adopt an aggressive approach to restoring public finances, particularly since HMRC already restored its preferential creditor status in insolvency procedures last December, meaning HMRC already take precedence when a company enters insolvency.”
“It’s pleasing to see HMRC are willing to work constructively with businesses, to avoid formal insolvency procedures and provide an opportunity for companies to restructure their finances instead, which will no doubt prove far more beneficial to our economic recovery in the long term.”
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