Midlands insolvency experts call for HMRC reforms

INSOLVENCY practitioners in the West Midlands have called for reforms to HMRC and the establishment by the government of a specialist insolvency unit.

The call, by the Midlands arm of insolvency trade body R3, comes after new research showed just 10% of insolvency practitioners believed that HMRC was ‘helpful’ when it comes to business rescue.

Over half (54%) of practitioners believe that HMRC makes it harder to rescue businesses than wind them up.

The data is based on a new study of the insolvency profession by R3, the insolvency trade body.

The survey also found that almost three quarters (71%) of insolvency practitioners believed that HMRC had made the insolvency process harder to manage in the last few years.
 
Prompted by the research findings, the Midlands branch of R3 has called for recently announced planned changes to HMRC to represent an opportunity for reform.
 
Newly-appointed R3 Midlands chair Chris Radford, a partner at Gateley in Birmingham, said: “There are plans to restructure HMRC to operate from a smaller number of centres.  R3 would like the government to use this as an opportunity to create a specialist insolvency unit, thereby cutting duplicate posts and offering more consistency in its decisions. This could make HMRC more accountable and far more efficient.
 
“Such innovation is crucial if we are to promote an effective and efficient business rescue culture.  Currently, the government as a creditor can be responsible for lengthy paperwork delays and increased administration costs.  HMRC’s lack of commercial decision-making capabilities can also undermine business and job rescue proposals.”
 
HMRC estimates that it loses up to £4bn a year as a result of insolvent businesses and individuals being unable to pay tax bills. This is equivalent to just over 10% of the total ‘tax gap’, that is the proportion of unpaid taxes against total taxes due.
 
“The better the government gets at working with the insolvency profession when taxpayers become insolvent, the more chance it has of shrinking this tax gap,” added Mr Radford.
 
R3’s survey also found that:
 
•           Insolvency practitioners estimate that 33% of the estimated 480,000 letters and forms they send to HMRC for a year’s worth of cases are duplicates of lost or ignored post, or are copies of letters that have to be sent to multiple HMRC addresses. This is equivalent to approximately 160,000 excess forms and letters for a year’s worth of new cases.
•           Over 54% of insolvency practitioners had to wait over three months for clearance from HMRC to close their last case; 25% waited between six months and a year.
•         50% of insolvency practitioners say that HMRC is one of the creditors they look forward to working with the least; 8% say the most.
•         49% of insolvency practitioners had to wait longer than 15 minutes the last time they called HMRC before their call was answered/cut off/they hung up; 25% waited over half an hour.
•         43% of insolvency practitioners have had requests for information from HMRC – to which they were entitled as Office Holders – rejected.