SMEs: Large Tax Bills Could Produce a Sharp Rise in the Number of Company Insolvencies This Year

    LONDON, ENGLAND, June 06, 2010 /24-7PressRelease/ -- Large tax bills for thousands of companies could produce a sharp rise in the number of company insolvencies this year.

Despite a slowdown in insolvencies in the last quarter, it's highly likely we will see them rise again during 2010.

An olive branch extended to SMEs by HMRC, in the form of the Business Payment Support Service, could come back to haunt them - if they struggle to repay their deferred tax bills. The scheme has helped over 160,000 small businesses defer payments of more than GBP4bn.

Although the scheme has been extended indefinitely, HMRC is going to be taking a tougher line on extensions and new applications in future.

Simon Wicks, Reed Finance, Senior Regional Manager for the South said: "A number of SMEs will have to pay their deferred debt in the coming weeks and months - with the threat of being forced into administration if they can't."

HMRC point to the fact that to date, the recovery on monies due and paid on time has consistently been between 90-94%.

HMRC have not bailed out all businesses, only those that could put together a business plan to show that the money could be repaid. Those who have been allowed to defer payments will have encountered a certain degree of robustness.

2009 saw large household names go into administration. The haulage industry, print, leisure and property development industries are amongst those sectors likely to find conditions especially challenging this year.

There are additional Government schemes to help, including the reduction in the small companies' tax rate from 22% to 21% - which has been extended to April 2011. The Capital Growth Fund is also being launched this year to provide investment for businesses looking to borrow between GBP2m and GBP10m.

"Despite these schemes, it is a fact that many businesses will now be forced to pay tax debt to HMRC, at a time when they could do with the capital to invest in growth as market conditions improve and at a time when banks are still reluctant to provide investment," adds Wicks.

A recent poll of R3 members - the professional body for insolvency practitioners - suggested insolvency numbers will rise to 28,000 this year, against 22,800 in 2009

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