Unpaid tax bills a major issue for UK firms
Unpaid tax bills were deemed a leading cause for HMRC applying to shut down businesses in the last year, according to new research.
According to online finance market Funding Options, the tax authority applied to shut down 3,000 firms for issues relating to unpaid tax bills.
HMRC was success in gaining court orders for winding up a company in 1,887 cases that related to tax debt, a rise of 4% from 1,816 shut down in 2013.
When businesses are wound up, their assets will be sold off to cover any unpaid tax bills that relate to them.
The statistics highlight the importance of effective cash flow and financial management, especially when it comes to having finances available to cover essential bills.
Tax liabilities and other operational costs need to be covered from the outset in order for a firm to meet regulations, and such payments should be a priority.
Options do exist to gain access to finance to cover tax costs, although banks tend not to want to lend in such instances due to the perceived levels of risk involved.
It is therefore crucial that firms plan ahead for such costs and have the appropriate levels of finance set aside in order to cover them.
If this is not possible, seeking financial assistance from insolvency practitioners is recommended as it may be possible to restructure a business to alter the situation.
Quick action is key as there is only so long HMRC can wait if tax arrears continue to build up – while winding up a company is not the desired approach, sometimes there is no other option.
The key for small businesses is to plan ahead as this not only enables effective cash flow management, but also helps to identify any potential risks that may impact upon the company.
Such planning enables a firm to seek alternative means of finance should it be required, providing them with further options for securing their future.
By Phil Smith