Thousands of small businesses in the UK face an uncertain future as a result of the government and HMRC's clampdown on tax avoidance, according to insolvency experts.
Insolvency trade body R3 says that companies are receiving demands for tens or even hundreds of thousands of pounds in potentially unpaid tax and National Insurance contributions. HMRC has said it expects to issue nationally a further 40,000 demands by the end of 2016.
Paul Barber, spokesperson for R3 and a partner at Begbies Traynor, said the use of disputed tax schemes was not limited to big business and celebrities.
“Up until 2011, tax schemes were widely used by small businesses operating in sectors such as IT, finance, construction, offshore oil and gas, and property. as a way to remunerate their senior staff," he said.
“Generally these businesses were acting in line with professional advice and had no reason at the time to think that these arrangements were not legitimate. One company I know had even received a tax rebate from HMRC as a result.
“While some no doubt wanted to avoid paying their tax bills, others saw it as a way to reduce overheads and help their businesses through the recession. Many of these are now receiving large tax demands that they have limited, if any, ability to pay and could be forced into insolvency. As yet it is unclear as to whether in some cases HMRC will seek to make directors personally liable under available legislation.”
HMRC is now collecting monies outstanding by issuing accelerated payment notices, a new tool which obliges companies to pay up within 90 days. It has raised £1 billion in tax so far and aims to raise £5.5 billion by March 2020.