Thousands of businesses face threat of insolvency
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Thousands of businesses face threat of insolvency
Thousands of businesses face the threat of insolvency as the ban on winding-up petitions ends on October 1.
Businesses urged to contact creditors and negotiate October 1 changes.
From October 1 the Government is phasing out its restrictions on winding-up petitions, meaning lenders and creditors can legally seek to liquidate a company that they believe is unable to pay their debts.*
Rebecca Dacre, Partner at international audit, tax, and advisory firm Mazars, says: “With the restrictions on winding-up petitions coming to an end within days, creditors will be allowed to begin the process of trying to wind up businesses to recoup debts. This could therefore see thousands of businesses facing the threat of insolvency.”
“The Pandemic resulted in significant levels of forbearance provided by lenders, HMRC, and trade suppliers but too many businesses are now putting themselves in jeopardy having failed to formalise repayment schedules**.”
“It is in both the business’ and creditors’ best interest to negotiate and directors should contact their business creditors, including suppliers and financial institutions as soon as possible to try and come to an arrangement.”
Many businesses in the UK find themselves owing large sums to HMRC predominantly due to deferred VAT and PAYE obligations.
Rebecca Dacre says, “HMRC has shown forbearance towards businesses who have made contact – giving them generous terms of repayment.”
“However, those who haven’t yet contacted HMRC or agreed to a formal Time To Pay arrangement to leave themselves open to receiving a winding-up petition. Inevitably HMRC will have to take a tough line against businesses that won’t pay their tax bill and won’t negotiate a rescheduling of that debt.”
“The Pandemic has resulted in a likely backlog of winding up petitions in the system. With this ban coming to an end, we anticipate a jump in the number of winding-up petitions presented.”
“The initial softening of requirements includes the need to issue a 21 days’ notice, which needs to be served on the company, and means that we will only start to see how big this jump is towards the end of October.”
*If the debt owed is at least £10,000
**Such as the Time-to-Pay Arrangement offered by HMRC
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