A squeeze on tax avoidance

Someone once told me, “I enjoy paying tax because, if I am paying tax then I must be earning money”.
In fairness, most people would agree with the above. Unfortunately, there has been a long-running battle for HM Revenue & Customs in catching up with those who see it differently.
Following consultation, legislation received Royal Assent within the Finance Bill 2019. Entitled, “Tax abuse using company insolvencies” it provides for a person to be jointly and severally liable for amounts payable to HMRC where at least one of the following five conditions are met:
1. Where a company that is subject to an insolvency procedure or there is a serious risk that it will be;
2. The company has engaged in tax avoidance or evasion;
3. The person responsible for the company’s conduct enabled or facilitated it, or benefitted from it;
4. There is likely to be a tax liability arising from the avoidance or evasion;
5. There is a serious possibility some or all of that liability will not be paid.
The legislation also provides for where there has been repeated insolvencies and non-payment.
The objective of this legislation is aimed at those:
• Who try to exploit the insolvency procedure to avoid or evade taxes and/or payment of taxes and duties;
• Repeatedly accumulate tax debts without payment by running them through a succession of corporate vehicles which are made insolvent;
• Try to sidestep penalties for facilitating avoidance and evasion by going insolvent.
One example I have seen included directors who had adopted a policy of VAT evasion where they have both been the recipients of 6-figure personal liability notices.
Before you panic this legislation is aimed at those who act in a deliberate manner of tax avoidance/evasion. It is not aimed at those who have missed the payment deadline for this month’s PAYE (provided you do still pay that is) or your overall circumstances demonstrate, as a director, you have acted honestly and fairly to creditors as a whole.
The key message that should be derived from this legislation is if you feel there is an increasing difficulty in managing the company tax affairs then seek early advice. HMRC are generally understanding where they learn of a possible issue at an early stage rather than wait until the need for enforcement procedures commences.
Should you have an insolvency-related issue or a corporate dispute then please contact Gary Pettit at PBC Business Recovery & Insolvency on (01604) 212150 (Northampton office) or (01234) 834886 (Bedford office). Alternatively, you may send an email to or access our website at

HMRC to be a preferential creditor once again


The 2018 Budget has seen the announcement that HMRC will regain their preferential creditor status, a position which they lost in 2002 under the Enterprise Act. Since then they have ranked alongside unsecured creditors (such as suppliers, landlords etc).

Chancellor Philip Hammond, speaking in Parliament said, “We will make HMRC a preferred creditor in business insolvencies…to ensure that tax which has been collected on behalf of HMRC, is actually paid to HMRC”.

Further detail announced by HM Treasury states, “Taxes paid by employees and customers do not always go to funding public services if the business temporarily holding them goes into insolvency before passing them on to HMRC. Instead, they often go towards paying off the company’s debts to other creditors.  From 6 April 2020, the government will change the rules so that when a business enters insolvency, more of the taxes paid in good faith by its employees and customers but held in trust by the business go to fund public services as intended, rather than being distributed to other creditors such as financial institutions”.

It is understood HMRC will become a “secondary preferential creditor”, ranking after current preferential creditors, which includes the Redundancy Payments Service and employees for certain elements of their employment rights. HMRC will only become preferential for debts collected by the company on behalf of HMRC, such as VAT, PAYE and employee’s NI contributions but will remain unsecured for Corporation Tax and employers’ NI contributions.

The Government believe this measure will result in an extra £185 million in taxes being recovered each year. However the policy will have other consequences such as:

  • Banks and other lenders may be unwilling to support companies, or charge higher interest rates on lending, as their risk will increase.
  • Other unsecured creditors, including small businesses, landlords, pension funds, suppliers and employees will see the amount they receive reduced.

The full release from HM Treasury is available here:

The budget also included confirmation of proposals whereby directors could be held liable for debts due to HMRC where there is a risk that the company may deliberately enter insolvency. Following Royal Assent of the Finance Bill 2019-20, directors and other persons involved in tax avoidance, evasion or phoenixism could be jointly and severally liable for company tax liabilities in certain cases.

Time to pay thanks to Carillion?

Following the demise of Carillion, HM Revenue & Customs have announced their Business Payments Support Services are open to approach by any company or business that has suffered a short-term cash flow problem as a result of the large scale failure.

The Support Service will consider:

  • Instalment arrangements of tax due that cannot be paid on time;
  • Suspension of recovery action/proceedings;
  • Review penalties for missing statutory deadlines;
  • Reduce any payments on account;
  • Agree to defer payments due to short term cash flow difficulties.


Should you find yourself facing difficulties to meet your tax liability as a direct result of the Carillion failure then you may apply to the Support Service on 0300 200 3835 or go on the website at and search “Dealing with HMRC-payment problems.”

The obvious question this raises is, “Why is this offer being made for Carillion creditors?” At PBC we believe this could set a precedent for others who are caught under an insolvency process.  After all, what is different between a supplier losing (say) £5,000 in the Carillion liquidation to that under “Standard” UK liquidation?

At PBC we are often approached to assist companies with addressing tax issues whether in respect of trying to secure a time to pay agreement or by other formal means where appropriate. Should you require advice in this respect then contact PBC and speak to one of our insolvency practitioners on (01604) 212150 or email

Solvent Liquidation – What is it and who can use it?

We are often asked ‘what is solvent liquidation’ and ‘is it suitable for me’? In this video, Gavin Bates, one of our licensed insolvency practitioners explains the meaning of solvent liquidation and gives some clear examples of when it can be used, what it is used for and what you can expect should you decide it is for you.

Solvent liquidation is not suitable if you are in difficulties financially. Please see our other videos for solutions to financial problems.