HMRC files 13% more winding up petitions
There has been a sharp increase in the number of winding up petitions issued by HMRC in the last year.
According to data compiled by Funding Options, HMRC issued 3,484 winding up petitions in 2015, up from 3,074 the previous year. This represents an increase of 13%.
A winding up order is a Court order that can force an insolvent company into compulsory liquidation if they cannot pay the money they owe. It is generally seen as the final step that a creditor can take against a company that owes them money.
In the case of petitions issued by HMRC, the debt takes the form of unpaid tax bills. A winding up petition is still generally the last option considered by HMRC but can be issued against tax debts of varying kinds, including partnership tax, corporation tax and VAT bills.
SMEs can often face difficulties when it comes to their tax obligations for a number of different reasons.
Cashflow can be more volatile for smaller businesses and they can be more vulnerable to market fluctuations. Another issue could be VAT, which is billed on sums invoiced rather than received. This can cause problems for small businesses when major invoices are not paid on time.
Despite the increase in the number of winding up petitions issued by HMRC, the overall number of corporate insolvencies fell from April to June 2016, as did the number of winding up orders overall.
Figures from the Insolvency Service showed that an estimated 3,617 companies entered insolvency during the second quarter of the year. This was a fall of 4.2% from the first quarter and was also 2.7% lower than Q2 2015. The fall was largely due to a decrease in the number of compulsory liquidations.
Richard Wolff, Northwest chair of the recovery professionals’ trade body R3, said that the low cost of borrowing had combined with a sense of patience shown by creditors since the financial crisis to contribute to the falling trend when it came to corporate insolvencies.
He warned however that recent confidence indicators could be pointing to a rise in business insolvency in the near future.
By Phil Smith