In the past year, there has been a dramatic 63 per cent rise in business closures driven by creditor petitions, with HM Revenue & Customs (HMRC) playing a significant role.
This surge is largely due to the financial pressures of managing Covid-era debts amid rising interest rates, compounded by HMRC’s backlog in handling cases.
Many businesses, struggling to pay their bills, are being pushed into liquidation by creditors such as suppliers, utility providers, banks, and HMRC, who are seeking to recover their losses.
Proactive financial management recommendations
In this challenging environment, businesses must adopt a proactive approach to financial management. Key steps include:
- Keeping a close eye on your income and expenditures to ensure that your business remains financially healthy and can meet its obligations.
- Focusing on paying off high-interest debts, especially those accumulated during the Covid pandemic, to reduce financial strain and prevent further escalation.
- Maintaining open communication with creditors to negotiate extended deadlines or more manageable repayment terms.
- Considering a Time to Pay (TTP) agreement with HMRC, allowing you to make phased repayments over an agreed period, helping to ease the burden.
- Considering insolvency options like a Company Voluntary Agreement (CVA), which allows your business to continue trading with creditors’ approval, or other insolvency solutions such as administration or voluntary liquidation as alternatives to closure.
Importance of timely debt repayment
Paying off debts promptly is essential to avoid drawing unwanted attention from HMRC.
Delays in HMRC services can affect your applications and financial standing, so it is important to keep accurate records of all communications with HMRC and other creditors.
This diligence will provide clarity and support in case of audits or other financial reviews.