Tue, 23 Mar 2021 | BUSINESS NEWS
According to law firm Pinsent Masons, the amount of unpaid tax owed to HMRC from UK taxpayers and businesses has risen to £65.5 billion during COVID-19, with the Treasury now facing a balancing act between reclaiming the debt and minimising company insolvencies.
The amount is more than treble the £19.3 billion owed in 2019 and has accrued due to taxpayers falling behind during the pandemic. £35 billion of the total outstanding amount relates to emergency COVID-19 support payments, while £3.5 billion is from deferred “Time to Pay” arrangements.
Pinsent Masons says that £26.6 billion of the debt is in arrears sufficient enough for immediate debt collection procedures. However, a moratorium on insolvency action means that HMRC is currently prohibited from taking enforcement actions, such as making statutory demands or issuing winding-up petitions.
While it is possible that this moratorium will be extended beyond its deadline at the end of the month, the figure comes as another reminder of the scale of business distress affecting UK companies and the possibility for a wave of collapses as support is withdrawn.
Steven Cottee of Pinsent Masons said that HMRC faces a “difficult balance to strike in order to protect taxpayers’ interests whilst also looking to minimise the number of insolvencies”.
Cottee added: “‘HMRC will need to ensure it is recovering as much money as quickly as possible but also look to support viable businesses where it can. If HMRC moves quickly it may recover more money in the short-term for the UK taxpayer, however it could result in more insolvent businesses which the government will be keen to avoid.”
“HMRC will need to have enough personnel with the necessary skills and qualifications to deal with these immense challenges and also be open to engaging with restructuring professionals to ensure that the interests of taxpayers and the UK economy are equally protected. The scale of the challenge for HMRC is unprecedented in recent times.”
Read more about the business distress impacting UK companies:
UK business distress at record levels – what happens when support is turned off?
620,000 SMEs in financial distress, new study reveals
View the latest distressed UK businesses here.
An outsourced employment law and HR specialist offering a comprehensive range of services for clients throughout the UK.
LEASEHOLD
The company offers personalised services to a growing client base, ensuring all art mounting, conservation and restoration requirements are met by a team of highly skilled specialists. Serving museums, galleries, Government departments and private co...
LEASEHOLD
Based in north West England. The business supplies, installs and maintains high-quality window and door systems for its clients. The company has developed a strong reputation due to a proven track record of supporting its customers and local communit...
FREEHOLD