With Midas Construction set to appoint Administrators, Scott Bebbington, Senior Manager at PKF Francis Clark highlights how this could affect you or your clients’ business and…
HMRC has issued a new statement about its approach to businesses which are in voluntary arrangements (VA). This is a formal insolvency process which often involves a business making payments out of its income, over a number of years, in settlement of past liabilities. HMRC is frequently a major creditor in such arrangements.
The statement recognises that Covid-19 is having a very significant effect on a large number of businesses. It also outlines how HMRC recognises the virus’s effect (hopefully temporary), on financial performance and helping businesses weathering this period and surviving into the future.
For businesses that are already in a VA, HMRC has indicated that it will be very flexible in allowing businesses to stop or reduce contributions into the arrangement for a period of time (up to two years and possibly longer). HMRC will also consider delaying the sale of assets, where these are proposed to be sold for the benefit of creditors, recognising that market conditions may not be right.
For businesses needing to put forward proposals for a new VA, HMRC is putting less emphasis on the business’s record of paying tax on time. There is a strong request for the relevant insolvency practitioner to be critical of business plans and projections to ensure that they are feasible.
In both cases, HMRC’s emphasis is on the continuing payment of tax liabilities as they fall due – the relaxations are very much in the context of old debt. This has always been a key determinant of HMRC’s attitude. They will not sit back and watch further tax liabilities accrue unpaid when they are also having to deal with unpaid old debt.
We are encouraged by this clear statement of support from HMRC for businesses either in or needing a voluntary arrangement. It fits in with the wider message being put out by HMRC (and indeed the Government) that tolerance needs to be shown to businesses struggling as a result of Covid, in order that the economy can bounce back as quickly as possible when the crisis eases.
We’re here to help
If you are concerned about your business, PKF Francis Clark can help with a Covid Business Review – helping you to understand your current situation and the best steps forward from there. We have a team of experts experienced in restructuring and negotiating with creditors and our focus is always on rescue and survival.