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Accountants and Insolvency Practitioners often find HMRC frustrating at times, however, since the COVID Pandemic, things have been more challenging. Almost all of our insolvencies and MVLs involve liaisons with HMRC. We aim to complete all our cases as quickly as possible so that monies can be returned to creditors and shareholders. The difficulties we have been experiencing with HMRC mean that we can’t always distribute monies as early as we would like. We find ourselves stuck in the middle between HMRC and the stakeholders to whom we are accountable, including directors, creditors, and shareholders. This can result in frustration on all sides and, at worst, reputational damage for the Insolvency Profession and impact the ability to win new work.
Recently, R3, The Association of Business Recovery Professionals, ICAS and ICAEW jointly wrote to HMRC outlining the Insolvency Profession’s concerns regarding HMRC’s management of insolvency from a tax perspective. We directly fed into this letter and some of the issues we have experienced are specifically noted.
The letter notes that HMRC delays in dealing with tax matters in insolvency cases on a timely basis have resulted in a detrimental impact on the ability of Insolvency Practitioners to progress insolvency cases in an effective manner resulting in additional costs being incurred and an increased regulatory burden in dealing with cases. These delays came to a fore during the Covid pandemic and have continued as things have returned to normal.
Delays in obtaining tax clearance from HMRC have often resulted in cases remaining open for longer than is necessary and in some cases impacting the ability of Insolvency Practitioners to pay dividend distributions to creditors or shareholders.
Insolvency Practitioners have also experienced considerable delays in receiving, sometimes significant, tax refunds from HMRC in instances where companies have been in a repayment position.
HMRC is often the largest creditor in an insolvency process and the letter sets out that Insolvency Practitioners welcome and encourage active engagement by HMRC, such as in exercising their voting powers to determine office holder’s remuneration or providing input on other decisions taken by them.
Constructive suggestions were set out and we wait to see if HMRC service levels will improve so we can return money to creditors and shareholders more promptly.