Thousands of business face insolvency as ban on liquidating firms ends today
As the Government is phasing out its restrictions on winding-up petitions, lenders and creditors can legally seek to liquidate a company that they believe is unable to pay their debts from today.
According to Rebecca Dacre, partner at City-based tax and audit firm Mazars: “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,” Dacre said.
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, she continued.
HMRC debts
Many businesses in the UK find themselves owing large sums to HMRC predominantly due to deferred VAT and PAYE obligations.
“HMRC has shown forbearance towards businesses who have made contact, giving them generous terms of repayment,” Dacre pointed out.
However, those who haven’t yet agreed a formal Time To Pay arrangement leave themselves open to receiving a winding up petition. Inevitably HMRC will take a tough line against businesses that won’t pay their tax bill and won’t negotiate a rescheduling of that debt,” she warned.
The Pandemic has resulted in a likely backlog of winding up petitions in the system. With this ban coming to an end, Dacre anticipates 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,” Dacre concluded.