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VAT Arrears

Money, customers and staff will all appear quite frequently but the most useful one we suspect would be time. 

Now we know that unless you’re Doctor Who, then you won’t be able to take advantage of a Tardis and jump back and forth between the past and the future but sometimes in this reality you can get some extra time to pay outstanding debts such as paying VAT arrears. 

But in the case of any outstanding VAT, if you need to pay PAYE or have outstanding corporation tax that’s owed to HMRC then there might be a way you can get more of this very precious commodity. 

It’s called a Time to Pay (TTP) arrangement and it can supply the essential time you need to repay some of these debts. 


What is a Time to Pay arrangement?

A Time to Pay arrangement is a legal agreement between a company and HMRC where they agree to repay any outstanding amounts in a more manageable way - usually between six and 12 months but this could be extended to two years in certain circumstances. 

If the repayment schedule is met with no late payments then HMRC will waive any interest or other accrued penalties. 

A TTP is not granted automatically as HMRC will judge each application based on its merits such as previous conduct with HMRC including communication and prior late payments. 

Before agreeing to any Time to Pay arrangement HMRC will ask the following questions 

The ongoing viability of a business is also a deciding factor as HMRC will need to be convinced that granting the arrangement will help alleviate a temporary, short term cash flow problem rather than continue to keep an unprofitable business afloat.

Missing a TTP payment will also likely be treated with zero tolerance as would any other breach of the arrangement. In these circumstances expect HMRC to demand immediate repayment in full.  

We’ve previously written about the VAT payment deferral scheme which allowed businesses to pay VAT that was deferred from earlier in the year over the course of 11 equal monthly instalments without paying additional interest or penalty charges but this is separate from a TTP agreement. 

Chris Horner, Insolvency Director with BusinessRescueExpert.co.uk, said: “Most creditors don’t like it when businesses get behind on their liabilities - especially if that creditor is HMRC. 

“Whether it’s PAYE, VAT or bounce back loan debt - they take arrears seriously and so should businesses that find themselves owing them.

“The best strategy is to get some professional advice and decide what to do based on your options rather than wade in without a strategy. 

“For instance HMRC can usually be negotiated with if a business lets them know in advance that they will have difficulty in meeting their repayment obligations. If HMRC has to get in touch first, then a TTP will be more difficult to obtain.

“Additionally, HMRC has been granted new powers which would make directors personally liable for company debts if there’s a risk that the business could close. 

“This makes it even more important for directors and business owners to get timely advice and act on it rather than crossing their fingers and going their own way.” 


What happens if a business can’t repay VAT arrears?

Before the majority of people had even heard of Covid-19, if a business was more than seven days late in repaying outstanding VAT arrears, they’d receive official letters demanding the money which is the first stage of their recovery process. 

After this they could send their officers to pay a personal visit, levy additional penalties and fines and ultimately, under certain circumstances, bring a winding up petition which would ultimately see a liquidator appointed to put a business into liquidation

A business that owes VAT, PAYE or corporation tax arrears might not be in specific financial difficulty but these would definitely be warning signs that trouble could be ahead if not dealt with promptly and effectively. 

If your business owes or might struggle to make future repayments then the best course of action would be to get in touch to arrange a free initial consultation with an expert member of our team.  

This is the first chance a director or business owner has to set out all the issues facing their firm so we can get a full and complete picture. 

Once we know exactly where you are, we can work with you to produce a plan to help get the business back on its feet as quickly as possible - but we can’t do anything unless you take the essential step of getting in touch first.

VAT Arrears

It’s when a previously overlooked and unpaid bill appears at precisely the wrong moment and can lead to a lot of trouble as a result. 

This nightmare might become a reality for many small businesses this autumn as HMRC begin their attempts to recoup as much VAT arrears as they can. 

As part of the response to the Covid-19 pandemic and subsequent lockdowns, businesses were allowed to defer VAT payments from between March and June 2020. 

These payments are now overdue and if no payment arrangement has already been made with HMRC then they will have an additional 5% penalty or interest added in addition to any outstanding amount owed. 

This is in addition to businesses in certain sectors such as hospitality seeing their reduced VAT rate of 5% during the pandemic rise this month to 12.5%. It is scheduled to rise again to the full 20% on March 31 2021.

HMRC confirmed that in September 156,000 of the 590,000 that had used the VAT deferral had not been in touch with them regarding repayments. 

Collectively they owed £2.7 billion of which 9% was made up of deferred VAT arrears or approximately £17,302 each. 


Can directors be made personally liable for their company’s debts this autumn?


What happens if you can’t repay VAT arrears?
Before the pandemic, if a business was more than seven days late in repaying then they would begin to receive letters demanding the money. 

HMRC works through a systematic process of escalation with letters being the first stage. 

After this they could move through to personal visits from their officers, additional fines and further penalties with the ultimate sanction being winding the company up and putting it into liquidation.

You can buy time to pay
There is a way to tackle your VAT arrears in a more manageable way - it’s called a Time to Pay (TTP) arrangement. 

Time to Pay is a formal legal agreement between the business that owes money and the HMRC. 

They agree to pay off the debt in regular instalments over a predetermined time scale - usually between six or up to 24 months and if the repayment schedule is adhered to then HMRC will waive any late payment penalties.

Each case is judged on its own merits by HMRC but the main elements they look at when deciding whether to grant TTP or not are:

What are HMRC looking for in TTP criteria? 
Always keep in mind that Time to Pay arrangements are designed to be a one off solution to a temporary problem. They are not meant to be a regular late payment fix or way to keep an insolvent company trading.

In order to be accepted a business has to convince the HMRC that their business is viable and can make a profit in the medium to long term but is experiencing temporary short term cash flow problems that it needs help with. 

A business will also need to satisfy HMRC that they will be able to manage regular repayments as breaching the agreement will likely see HMRC demand repayment in full.

Other factors they will take into consideration include previous compliance - making sure the business has tried to repay tax within the previous year.

They will also look at if you’ve been in touch with them to let them know you would have problems repaying the amount and that all financial statements made to them have been accurate. If there are any discrepancies then HMRC will reject the proposal straight away. 

When making the application the best thing to do is to keep things simple. 

Have a clear, explanatory story of why the business was unable to repay the debt and how it will meet the TTP payments with supporting, up to date financial information including profit & loss accounts and cash flow projections. 

Any letters of support from an accountant or funder would also be useful but the agreement should also be realistic - HMRC will not renegotiate a TTP if payments are missed so make sure repayments can be met under all circumstances. 


Owing VAT, PAYE or Corporation Tax shouldn’t really come as a surprise to a business owner or director who has a firm hand on the finances of their business. 

But even if you’re not receiving letters and communications from HMRC asking where their money is - if you know repayment could be a struggle then you should get some impartial professional advice as soon as you can

Our free initial consultation will give you the chance to go through any other issues your business is facing and together we can work on an efficient, effective plan to tackle them in order of severity and impact. 

Not all creditors are created equal and HMRC are one you really should look to keep on the right side of at all times. 

Getting in touch before you need to could be the first step in the right direction for you and your company.

rent rates VAT

There’s a lot but today we’ll concentrate on what recent developments there’ve been concerning commercial rents, business rates and VAT payments. 


Business Rates
The British Retail Consortium (BRC) is reporting that 83% of their members would have to close some stores if there isn’t immediate reform of the business rates system. 

Their latest survey found that business rates have had a material impact on 67% of store closures in the past two years during the pandemic and subsequent lockdown. 

When business rates were first introduced in the 1990s they were set at 34.8p in the pound and corporation tax was 34p.  Today corporation tax is 19p and business rates have risen to 51.2p.

The retail sector has the most exposure to business rates paying a cumulative 25% of all collected which raises £8 billion. 

The BRC claim that the business rates system has grown disproportionately compared to other taxes and levies and is especially unfair in punishing businesses that have a physical presence in a high street while online competitors have no liability. 

During the pandemic business rates relief was granted although this expired in June 2021. 

Another point of contention for the BRC is that business rates are still based on property values that were taken in April 2015 and do not reflect how property values had slumped during coronavirus lockdowns, nor do they reflect a business’s sales or overall profitability. 

A government review into business rates is due to be published in the Autumn. 

Helen Dickinson, chief executive of the BRC, said that their latest report “underscores the urgency of fixing the broken business rates system”. 

She continued: “Given the retail industry contributes almost £100 billion to the economy and employs over three million people spread across the country, it has a vital role in the UK’s economic recovery.

“Our report underscores the urgency of fixing the broken business rates system, which currently holds back new jobs and investment. With one in seven shops currently shuttered, it is essential that action is taken, or else it will be our local communities and high streets which suffer the consequences. 

“The Government needs to bring the burden down and take action to ensure that the system reflects the property market values more quickly. 

“This should include a cut in the multiplier rate, returning it to its original rate of 35%. Furthermore, the government should introduce an improvement relief to prevent stores being immediately punished for investment into their property. 

“At a time when the Green agenda is so important, it’s madness that business rates should rise for a firm that adds solar panels to their property.”


VAT
Businesses in the hospitality sector especially are bracing themselves for a rise in the VAT rate at the end of September. 

The VAT rate was reduced to 5% in July 2020 and extended as the pandemic continued although this will rise to 12.5% for six months until March 31 2021 when it will expire and all goods and services will return to the 20% level. 

UKHospitality (UKH), the trade body for the industry, would like to see the reduction made permanent.

UKH Chief Executive Katie Nicholls said: “The pandemic has had a devastating impact on our sector. 

“The last 18 months have seen the hospitality industry lose over two thirds of its normal revenue, 10% of its businesses and seen headcount fall by almost 30%.

“The situation could have been so much worse had we not worked tirelessly to secure the support the sector needed from the government and while we know it has not been enough to offset the losses, it has undoubtedly saved jobs and livelihoods. 

“Crucially, that support and engagement is continuing beyond reopening and into recovery as we have measures to rebuild resilience. 

“We will aim to consolidate the profile the crisis has given the sector as a critical part of the UK economy and the perception of the role we can play in the UK’s recovery.”

Businesses that deferred VAT payments between March and June 2020 have to repay these fees and will incur a 5% penalty or interest if they did not make a payment arrangement by June this year.


Commercial Rent
Business tenants have enjoyed a modicum of protection over the past 18 months as various steps and measures have been taken to offset a wave of evictions and business failures due to the pandemic. 

Firstly commercial landlords were prevented from evicting tenants for failure to pay rent then restrictions were put in place to stop landlords recovering rental arrears through the seizure of tenants’ goods as they otherwise could through the Commercial Rent Arrears Recovery (CRAR) process. 

The final protection was the temporary ban on the ability of landlords and any other creditor being able to serve statutory demands and winding up petitions - although this changes at the end of September and for the next six months they can be issued for amounts totalling £10,000 or over.

There was also a code of practice for commercial property relationships published in June 2020 that applied to all commercial leases held by businesses that had been negatively impacted by the pandemic. 

The code is voluntary but is meant to facilitate fair and transparent discussion between landlords and tenants over rental payments and arrears. 

It states that while tenants remain legally required to pay due rent under the condition of their leases, tenants who are unable to pay in full should enter discussions to find a way to pay what they can afford. 

Since then the government has extended the moratorium on evictions and use of CRAR to March 25 2022 and announced that they would shortly introduce further legislation to:

The government has stressed that once legislation is passed the tenant protection measures will only apply to ring-fenced arrears. 

This includes rent debt accrued from March 2020. So any debt incurred before this or after the end of restrictions for their sectors and those who haven’t been affected by any business closures can be pursued by landlords for payment. 

A policy statement published earlier this year said: “The British Property Federation (BPF) estimates that by June 30 2021, £7.5 billion of commercial rent will be in arrears. Remit Consulting estimated that as of March 30, £5.3 billion of commercial rents arising since March 2020 were unpaid, of which half (£2.8 billion) was in the retail sector.”

Introducing a system of arbitration similar to countries like Australia and backed by the British Retail Consortium, UKHospitality and the BPF is an attempt to provide a long-term solution to the rent arrears problem and end any uncertainty. 


While the end of September brings with it several changes and challenges - it also brings opportunities. 

There is still time for a business to put a restructuring plan in place to deal with problem debt like bounce back loans, VAT arrears and other bills. 

Alternatively, if the debt is insurmountable then it might still be possible for the company to close down and pay off a proportion of these liabilities to creditors but only after taking professional advice. 

We offer business owners and directors a free initial consultation to discuss the issues facing their business and the choices facing them. 

They might be surprised with the range of options available but only if these will only be available if they act quickly and then implement them.  

The longer the delay the less choices they will ultimately have.

 

There are still local spikes here and there all over the UK and as we enter the traditional winter flu season, there might be temporary measures deployed if coronavirus cases rise sufficiently.

The government has also declined to implement planned vaccination passports for people attending large events in England so individuals and businesses could now begin to plan their Autumn activities with more certainty. 

Against this backdrop it’s been confirmed that the various remaining pandemic support measures including the coronavirus job retention scheme or furlough will definitely end on September 30th along with a lifting of the ban on winding up petitions.

While it was expected that creditors would be able to seek winding up petitions once again, there’s been a sizable catch - so that now bringing a winding up petition is literally a £10,000 question. 

New legislation to be introduced in parliament shortly will:

These measures will remain in place until March 31 2022.

Business Minister Lord Callanan said: “The time is right to lift the insolvency restrictions that were needed during the pandemic. 

“At the same time, we know many smaller businesses are rebuilding their balance sheets and reserves, and some will need more time to get back on their feet. These new measures and protections will help them to do that.”

The minister said that businesses should pay their contractual rents where they’re able to do so and also confirmed that existing restrictions will remain in place on commercial landlords from pursuing winding up petitions against limited companies to repay commercial rent arrears built up during the pandemic.

Additionally commercial tenants will continue to be protected from eviction until March 31 2022 while a rent arbitration scheme to deal with commercial rent debts accrued during the pandemic is implemented.

One measure not time bound by restrictions are new legal powers given to the Insolvency Service which allow them to retrospectively investigate the conduct of directors of dissolved companies. 

If they can prove that directors were dishonest or culpable in behaviour which led to their company’s failure then as well as being made personally liable for any debts incurred, they can be disqualified from acting as a director for up to 15 years. 

This includes bounce back loans so obtaining professional advice is critical if you’re thinking of closing your business.

Chris Horner, Insolvency Director with BusinessRescueExpert.co.uk said: “The new £10,000 threshold for winding up petitions sounds like a big increase from the previous minimum level of £750.

"But in reality, due to the associated expense in issuing winding-up petitions, the vast majority of pre-COVID winding-up petitions were over the new level in any event.

“Eager creditors will examine their options carefully and look to use whatever leverage they have.

“Hopefully, many companies use the new 21 day period to negotiate sensible repayment plans. Seek expert help if in doubt about how best to approach this.

“Like the insolvency moratorium that’s automatically granted if a company goes into administration, this provides valuable breathing space and time for a business to come up with plans to deal with problematic debt.

“This includes outstanding bounce back loans or VAT arrears - they haven’t been suspended - and a business can still close down, even if a company has these debts but only if it’s done using the right method overseen by an insolvency professional.

“For example, If a business with unsustainable debt wanted to close and started the process in the next couple of weeks - it could probably be concluded before Christmas, leaving the directors or owners free to begin a new venture or career in 2022.”


Why you should pay to liquidate your business


Time is only an asset if it’s used effectively. 

The 21-day negotiation period of winding up petition restrictions and £10,000 floor is only useful if you take advantage and get professional advice now because it will, like all the others, cease eventually. 

We offer a free initial consultation to any business owner or director who wants to know the best way to close their company or if possible, restructure and keep it alive, even if it has debts.

Once we get a better understanding of the situation, we can come up with a tailored solution possibly with more options and choices than you thought you had. 

But this is only possible if you use your agency and get in touch.

 

For instance, it’s common sense for builders, scaffolders and cement pourers to be classed together under construction but what about a travel agent and a security guard?

Or a car leasing company and a landscape gardener? Or an employment agency and a bouncy castle hire business?

They all come under the seemingly disparate title of administrative and support businesses which is a broad umbrella title that covers amongst others: 

So now we know which sort of businesses we’re talking about - how did they collectively manage during the year of lockdowns and afterwards?

Less is more

The initial figures show that in the year leading up to the first lockdown being implemented - Mar 2019 to Feb 2020 - there were 1,798 insolvencies involving businesses in the administrative and support sector. 

The immediate 12 months afterwards - Mar 2020 to Feb 2021 - saw 1,421 administrative companies close. 

Although this is 377 less, it’s still larger than might have been expected considering the temporary halt on creditor actions like winding up petitions and the range of additional support made available to businesses over the past 18 months.  

1,421 is a larger number than the losses reported by the hospitality and retail sectors, which were most popularly believed to be the worst affected in the pandemic with 1,378 hospitality companies and 1,355 businesses in the retail sector becoming insolvent. 

According to official statistics supplied by the Insolvency Service, there have been an additional 358 insolvencies in the administrative sector since March this year which takes the total number since lockdown to 1,779 - which is 118 a month or 29 a week shutting their doors. 

Did bounce back loans soften the blow?

The coronavirus jobs retention scheme or furlough, did help a lot of administrative businesses keep staff rather than forcing them to be made redundant. 

As the travel industry ground to a halt and nightclubs and other sectors that would usually require security staff didn’t need them, administrative businesses with no income needed support and quickly. 

The bounce back loan scheme and CBILS was rolled out for just such a purpose and these companies made use of it. 

The number of loans taken out by administrative services was 102,946 - more than the collective borrowing of the manufacturing, real estate and transportation business sectors. 

The total amount borrowed was £3 billion, which is an average borrowing amount of £29,141 per company.  

Under the most conservative official estimates, it’s expected that 15% of the total lent to the industry would remain uncollected would be £450 million but if the default rate rose to even 40% then this figure would also grow to £1.2 billion. 


You can still close your company even if you have bounce back loan arrears - find out how


Since pandemic restrictions began to be lifted, administrative businesses can begin trading again and supplying their valuable services to customers but there are storm clouds gathering on the horizon

The furlough scheme is finally being wound up at the end of September which means businesses either have to bring their furloughed workers back on full pay or implement redundancies. 

Any bounce back loan or CBILS arrears will continue to grow if they’re not being paid and any outstanding VAT arrears from their suspension in 2020 are now due too. 

Creditors will also be able to begin to take action to reclaim unpaid debts from September 30th too, allowing them to seek statutory demands and winding up petitions if not paid within 21 days of receipt. 

Chris Horner, Insolvency Director with BusinessRescueExpert.co.uk said: “Administrative businesses have had one of the worst hands dealt to them during the pandemic and lockdown. 

“A lot of them didn’t qualify for any support other than bounce back loans and repaying these could become one of the biggest challenges businesses face this and next year if they aren’t able to trade like they did before. 

“The travel industry is still in flux to put it mildly, hospitality and nightclubs are just reopening but will need to comply with new rules and regulations shortly with little guidance being given to their security on how they will be implemented. 

“The shakeup in the commercial property sector will have big knock on effects for cleaning and landscaping businesses that service them so will make their financial forecasting nearly impossible to predict too.

“One thing administrative and service businesses can do is adapt and adapt quickly so they can use their talent and experience to take advantage of the little time left before September 30th and get some professional advice on how they can help themselves before so many rules change.

“A recovery strategy can work but only if it’s created and implemented now. This can include managing any unsustainable debt including bounce back loan arrears, VAT arrears or CBILS.”


A lot of people thought that by the end of September 2021, if not business as usual, we’d be at a stage of business getting back to usual. 

But for many companies and sectors - especially administrative and support businesses - it really isn’t. 

Debts have increased, more are appearing and the last protections from creditors are days away from being removed. 

There could still be a practical way forward for a business in this position but only if they take the first step and get in touch to arrange some practical, professional advice

We offer directors and business owners a free, initial consultation to set out their position and once we get a full understanding of the issues we face, we can work with them to create a strategy to meet and defeat these challenges. 

But get in touch today because after September 30th, the choices might be harder still. 

 

The Coronavirus Job Retention Scheme, more commonly known as furlough, was launched in March 2020 to support businesses and employees through the unprecedented disruption caused by the coronavirus and subsequent lockdowns. 

In our Year of Lockdowns report we found that one in three UK workers were in receipt of a furlough scheme payment at some point in 2020. 

The popularity of the scheme peaked in April 2020 when just under nine million workers were furloughed although this total has reduced to just over 1.9 million by the end of June 2021. 

According to the latest official figures, 11.9 million jobs had been placed on furlough by over 1.3 million employers at some stage during the previous 18 months at a total cost of £65.9 billion. 

This might seem expensive but it would be argued by supporters that it fulfilled one of its primary objectives by holding the unemployment rate at 5.1% at the end of 2020 which saw an additional 1.7 million people looking for work but without furlough. 

This figure has since reduced to 4.8% at the end of June 2021 and is currently only 0.9% higher than at the beginning of the pandemic. 


Why you should pay to liquidate your company


Since May 2021, the central contribution to employees wages from the government has reduced from a figure of 80% of the total wage up to a maximum of £2,500 down to 60% of the total to a maximum of £1,875. 

The employer continues to pay national insurance contributions (NICs) and pension contributions for staff as well as a 20% contribution to wages for hours not worked up to a maximum of £625.

Along with many other notable changes occurring at the end of the month, the one which is expected to have the most immediate effect is the final closure of the CJRS.

Chris Horner, insolvency director with BusinessRescueExpert.co.uk, thinks attention should be paid to the discrepancies between various sectors and mismatches between vacancies and employees when analysing the impact. 

One example is in the hospitality sector including both accommodation and food services.

The Office for National Statistics vacancy survey showed that 117,000 jobs were available between May and June but at the same time 337,800 staff remained on furlough during this period. 

Even if furloughed staff successfully reapplied for all those positions, there would still be over 220,000 workers left without positions. 

He said: “When you have a mismatch between the sectors that people are on furlough from and the sectors that are actively recruiting then there will naturally be an imbalance that has to be carefully managed - both in terms of the personnel and the support given to businesses in those areas. 

“Some skills will be transferable but not every position is. 

“Sales assistants and hospitality staff might not want to take pay cuts to move into the care industry or spend time retraining as a delivery driver or production operative for instance.

“This could clearly have implications for businesses and unemployment in the short term at least.

“For small business owners and directors, who are already juggling with bounce back loan repayments, VAT arrears, the return of creditor actions including winding up petitions and business rates, a staffing crisis will be the last thing they need.”


Bounce back loan arrears affect sole traders and partnerships too


If you think the school holidays and summer went quickly, you won’t believe how soon the end of September will arrive. 

There is still just enough time to get in touch with us and arrange a free initial consultation with one of our expert advisors.

If you’re worried or already having problems repaying debts like bounce back loans or VAT arrears then we can help advise you on what your options are. 

The sooner you take action, the more time and leeway you’ll have to use - because sadly, time and choices will eventually run out.  

Administrative Restoration

But is there a way that they can come back?  And why would a director want to resurrect a closed company anyway?

Administrative restoration is the official term for bringing a dissolved company back into existence and we’ll explain further how they can be returned to life and why directors might want to do this.


Why you should pay to liquidate your company


One reason why a dissolved company could be restored is if the directors believe it may have a profitable future trading again. Maybe the market conditions have changed or they are in a better position to make a success of the venture now than they were previously. 
The only limit to restoring a business in this way is it cannot have been dissolved for more than six years. 

The six year time limit also applies when directors look to restore a business in order to release and realise an asset. 
If a business is struck off or dissolved while still holding assets then they could become the property of the crown after a certain amount of time has elapsed. Also, they could be classed as ownerless or “bona vacantia”. 
In either scenario, if this is why a company is being restored then Companies House could temporarily place the business back on the register in order to facilitate the asset transfer or sale. 

Unlike the administrative restoration time limit of six years, there is no such restriction when it comes to pursuing claims against a dissolved business. The company might have to be restored in order for an injury or other legal claim to be lodged against it and subsequently defended.

The final reason to restore a struck off company is to rectify mistakes made during the initial process. 
A company can only be struck off if it has no debts or arrears.  
Under the imminent Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill - HMRC and the Insolvency Service will be granted retrospective investigation powers against directors. 
This will allow them to look at the circumstances and actions of directors of dissolved companies and if any errors were made, such as striking off a business with an outstanding bounce back loan or VAT arrears for example, they could be followed with sanctions. 
These would not only be fines or a disqualification period which could stretch to 15 years but under the new laws, directors could be made personally liable to repay company incurred debts.


Businesses that have been struck off by Companies House for failure to submit annual accounts or confirmation statements can also be reinstated but like all administrative restorations, they have to meet a certain criteria such as trading when they were struck off and that Companies House enforced the decision, not the directors.

If they do then they can apply to Companies House and complete an administrative restoration form.

If the business was not forcibly removed or doesn’t meet the criteria then they can seek company restoration by a court restoration order instead. 

Once the application is filed and if all the essential forms such as business accounts and financial statements are up to date then the procedure will usually be completed in about four months. 

Chris Horner, insolvency director with BusinessRescueExpert.co.uk said: “Restoring a company just to liquidate it might sound like a hassle but it could be the best thing a director could do to protect themselves if they have any concerns. 

“The new legislation is almost exclusively aimed at directors who have tried to avoid repaying bounce back loans and other debts through dissolving their businesses. 

“But directors who inadvertently struck off their company while it still had debts could very well get caught up in the same sweep.

“Directors who liquidate their companies voluntarily through a creditors voluntary liquidation (CVL) or other process don’t have anything to worry about - HMRC and the Insolvency Service are not targeting them. 

“To avoid any doubt and worry, it would make sense for a director to restore their company, liquidate it and then continue with their career after all the loose ends have finally been tied up.

“They would then avoid disqualification and being made liable for a compensation order up to the value of the company debts plus fines and costs on top.” 


Liquidation brings many benefits to a business owner or director. 

As well as having more say in the process of appointing a liquidator, they can also legally close down even if they owe bounce back loans or other debts.

It brings finality to the situation through a definitive ending allowing the owners or directors to move onto their next venture without any more stress. 

If a business has been dissolved improperly or if it had debts when it was struck off then this is a loose end that could become a bigger problem - especially if the Insolvency Service takes an interest in the business and how it was being run before closure. 

Getting advice from an insolvency professional is always a good idea if you’re thinking about closing a business but if you need to consider an administrative restoration then it’s essential. 

We offer a free initial consultation for any business owner or director to discuss the issues facing their company and together we can work out an efficient and effective solution which can usually be begun to be implemented almost immediately. 

The sooner you get in touch, the sooner we can help.

We’ve all seen multiple examples of it on social media especially, people will gleefully share false news and images that a simple check of the BBC or other reputable news site could tell them is not true. 

Received wisdom and advice can be harder to disprove than this so we find it annoying when we hear false and wrong advice passed off as something credible. 

One example we’re sadly hearing a lot about recently is the idea that companies with debts, including bounce back loans, business rates and VAT arrears, can simply dissolve themselves and these obligations away into thin air. 

Usually sensible people have been taken in by this one in particular - we even had a good client ask us “why should I pay for my company’s liquidation? Can’t I get it for free if it’s struck off?”


Why are businesses with outstanding bounce back loan borrowing being stopped from closing down?


The main reason why you should consider a voluntary liquidation rather than a strike off is because of the directors investigation aspect. 

The liquidator has to investigate the conduct of the directors in the lead up to the liquidation as a mandatory part of the process but if you have done everything in your power to keep the business running and have kept your records in good order then you’ll have nothing to worry about. 

Even if, in hindsight, you’re worried about how a couple of your decisions and actions might be viewed, you can explain the circumstances and rationale to the liquidator and if you can provide supporting evidence, they will be quite likely to accept your version of events and say so in their report to HMRC. 

The same doesn’t apply for directors who try to strike off or dissolve their company with outstanding debts - whether they be bounce back loans, CBILS, VAT arrears or other tax payments they owe. 

The rules about striking off are very strict and explicit - no company with debts can be struck off. 

But this doesn’t stop some unscrupulous business owners from trying to dissolve the firm to avoid their obligations - or honest directors that have received some bad advice and been told that this is possible.

There’s a new law making its way through parliament at the moment - the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill - that will give dishonest directors some pause for thought. 

Right now director disqualifications can be implemented for clear offences such as falsifying records and taking money out of an insolvency business. 

Any attempt to defraud HMRC by deliberately avoiding paying bounce back loan debts for example, would also very likely lead to disqualification.

The HMRC have held their fire considerably during the pandemic and subsequent lockdown periods because of the unique situation a lot of otherwise viable and profitable businesses found themselves in.

Things are changing as more industries begin to trade without restrictions, HMRC and The Insolvency Service will also be moving up the gears to begin recouping some of the historic levels of support paid out. 

One way they will do this is by using new powers given to them by the bill that allows retrospective investigations and actions to be taken against directors for the first time if they’re found to have dissolved their company with outstanding debts. 

Company strike offs and dissolutions will be examined to see if any were carried out with outstanding debts and if discovered could lead to punishments including fines, disqualifications of up to 15 years and personal financial liability to settle the debts placed on the directors. 

Business Secretary Kwasi Kwarteng said: “We need to restore business confidence and people’s confidence in business. 

“This is why we won’t hesitate to disqualify directors who deliberately leave employees and taxpayers out of pocket. Extending powers to investigate directors of dissolved companies means those who have previously been able to avoid their responsibilities will be held to account.” 

Chris Horner, Insolvency Director with Businessrescueexpert.co.uk, sets out the likely scenario.

“The new legislation is clearly aimed at those directors who thought they’d be clever and try to dissolve their companies to avoid paying their creditors - including HMRC.

“Directors who’ve done the right thing and liquidated their companies voluntarily through a creditors voluntary liquidation (CVL) or other process don’t have anything to worry about from the bill. 

“Dissolution or striking off a company is a cheap and efficient way of closing a dormant or debt free business and thousands of businesses do it every year. 

“It’s the small minority of directors who thought it was a great way to dodge their debts that should rightly be dreading a letter, email or increasingly possible from the end of September - a knock at the door. 

“An important point to make for businesses that legitimately took out bounce back loans or CBILS borrowing is that they aren’t HMRC’s primary target either.

“ As long as they have kept records and documentation or other evidence that supports their explanations on how the money was used, why they borrowed it, how their business functioned during the pandemic then they can be confident that they can answer any questions fully and convincingly. 

There are several other good reasons why you should be happy to liquidate your business voluntarily:

You can take advice and pick the insolvency practitioner choice of your choice to oversee the process and guide you through the issues and requirements. 

If a company goes into liquidation any personal guarantees directors have given on debt will crystallise - becoming payable immediately. A liquidator will help you create a plan to deal with this situation. Similarly, a liquidator has a duty to recover any funds owing from overdrawn directors loan accounts and can advise ahead of time the best course of action to deal with this eventuality.

A liquidator can advise on the redundancy procedure for existing staff and/or the transfer of existing staff to a new business (TUPE). 

One often overlooked but important detail is that directors who have been paid via PAYE are also eligible for redundancy payments. 

The liquidator can advise the best way forward to access what could be some vital income - especially as it may be possible to use it to finance the liquidation process with the proceeds.

There are a lot of things that have to be done correctly in a liquidation and it can be easy to lose track of them, especially if your attention is being pulled in several different directions. 

The liquidator will keep you on track of what needs to be done, how and when including the sale of assets, transfer of leases and several other requirements.

Topics such as liquidation and dissolution can be stressful at the best of times but even more so when sanctions such as disqualification and being made personally liable to repay any debts your company was closed down inappropriately or deceitfully. 

The vast majority of businesses that have closed down in the past two years have nothing to worry about. They did their duties to the best of their ability and made the difficult but ultimately correct decisions to close their companies down.

Several others might now be in a similar position and are nervous that although the correct decision is to liquidate the business, this wouldn’t be the end of matters for them or the company. 

We can reassure them in one conversation. 

After a free initial consultation with one of our expert advisors, directors will have a far clearer idea of what options they have to close or restructure their companies, the costs involved and what the likely timescales will be. 

Then, for the first time in a while for many, they will finally be able to see an end to their problems and be able to think of new beginnings instead. 

Business Rates

The review is still accepting evidence submissions until August 24th 2021 so business owners and directors are still able to register their views and opinions until then by completing an online survey. 

Business rates had been held in abeyance since March 2020 when the government introduced a business rates holiday for retail, hospitality and leisure businesses for the whole of the 2020/2021 tax year.
 
This was due to end on March 30 2021 but was extended until June 30th 2021 and that the business rates multiplier would be frozen for the whole of the 2021/2022 tax year as well. 

Business rates are now live again although relief continues at a rate of 66% until March 31st 2022. 

It will be capped at £2 million per business for properties that were legally required to be closed on January 5th 2021 or at £105,000 per business for other eligible properties.  

There was also a one-off top-up grant available of £9,000 per property and a £594 million discretionary fund made available to support businesses that weren’t eligible for the grants but were affected by Covid-19 restrictions. 


Find out why you may only have six weeks to save your business this summer


This is against the background of continuing chaos for high street retailers. 

Helen Dickinson OBE, Chief Executive of the British Retail Consortium said: “The retail vacancy rate is continuing to rise. 

“Many shops and local communities have been battered by the pandemic, with many high streets in need of further investment. Unfortunately, the current broken business rates system continues to hold back retailers, hindering vital investment into retail innovation and the blended physical-digital offering. 

“The Government must ensure the upcoming business rates review permanently reduces the cost burden to sustainable levels. Retailers want to play their part in building back a better future for local communities, and the government must give them tools to do so.”

Doug Putman, owner of the HMV chain said that the government urgently needed to fix business rates which can take years to adjust to reflect the actual levels of rent paid. 

This results in many retailers paying higher business rates despite rents falling as internet competition increases. 

To add insult to injury, online retailers pay lower business rates because they operate from fewer properties and can base their warehouses in cheaper business rates locations. 

Putman said: “If the government doesn't fix the rates, high streets are going to see a lot more vacancies. 

“Business rates just don’t make much sense. You can pay zero rent and still not make a profit on a store as rates are too high.”

The business rates review has been promised for some time. 

The system provides approximately £32 billion to local authorities but one of the main criticisms is it’s trying to raise too much money from too few property occupiers. 

Physical retailers pay between a quarter and a third of this amount but, while a critical component, retail adds less than 10% to the national GDP - and this was before Covid-19.

Additionally the annual business rates multiplier, currently set at 51p in the pound, is effectively a 50% tax increase baked in which will further burden businesses struggling to break even or make a profit. 

Most citizens and businesses accept that the system plays an important role in generating funds in a manageable way and is difficult to evade as it’s physical and property based but every system can be improved. 

As well as general wishes such as lowered rates and a reduction in the multiplier, what else could we expect to see when the review is announced later this year? 

Among the more popular suggestions for changes include:- 

The idea of business rates supporting local services might also be one that is fundamentally examined in future. 

The Local Government Association (LGA) has warned the government that any changes to the business rates systems has to recognise the importance of this income stream for funding local key services and look to increase funding sources as confidence in the current system dwindles. 


Bounce back loan debt - can you still be pursued after you close your business?


Usually business rate arrears can be a serious problem for businesses as the creditor in this case is their own local council. 

They would usually send a reminder letter followed by a summons and look to be granted a liability order which would give the council additional powers to enforce the debt including the use of bailiffs and ultimately insolvency proceedings to close a business down.

Now business rates are eligible to be paid again, albeit with a high relief level, it could quickly turn into a serious headache for business owners and directors who’re already having to work out how they can make bounce back loan repayments, rent, VAT and increased contributions to any staff remaining on furlough with potentially permanently reduced income streams. 

If you think your company might have to choose which bills to pay and which to let go into arrears then get in touch with us first.

We’ll quickly arrange a free, initial consultation where we can get a broader understanding of your situation and what your near and medium term prospects look like. 

Working closely with you, we can then provide a series of options to help protect the business and better manage your debt obligations or create an orderly path to closure which would also take care of any bounce back loan or business rates arrears that have or will build up in the meantime. 

Whichever approach is best for you and your business, we’ll be able to help you manage it efficiently, effectively and as stress free as possible. 

papers on a desk

According to statistics released last month as part of a wider FOI release, 156,000 businesses out of 590,000 that took advantage of the VAT deferral offered between 20 March and 30 June 2020 have failed to get in touch with HMRC. 

They have not repaid any money owed even though the deadline to either repay in full or arrange a repayment plan passed on 30 June 2021. 

The total amount of outstanding tax was £2.7 billion of which 9% was made up of VAT deferrals. Additionally £17.8 billion of VAT has been repaid and another £13 billion is due through agreed monthly instalments. 

The VAT Deferral New Payment Scheme was set up to allow businesses to self-serve by spreading their deferred VAT payments by up to 11 equal monthly instalments, interest and penalty free. 

An HMRC spokesperson said: “Businesses had up to 30 June to make arrangements to pay deferred VAT, so those who failed to take action should contact HMRC to pay what they owe. 

“They may still be eligible to receive support with their tax affairs through our Time to Pay service. These arrangements are agreed purely on a case by case basis and tailored to individual circumstances and liabilities.”

Now, HMRC will begin their efforts to reclaim as much outstanding VAT debt as possible and will make every effort to do so. They have begun by announcing that any business that fails to get in touch to arrange a payment plan for their overdue VAT payments will face penalties of 5% of the money owed plus interest. 

The next step usually involves bailiffs and other direct debt enforcement measures. 


How will HMRC handle bounce back loan arrears and debt?


Chris Horner, Insolvency Director with Businessrescueexpert.co.uk, said: “In our years of experience, we know that HMRC are not happy when businesses ignore their liabilities - whether they’re behind on VAT payments or have bounce back loan debt they can’t repay.

“They have no problem letting their debt management unit loose to enforce and secure debts - especially if the owners or directors haven’t been in touch with them. Even before the pandemic, HMRC was the most tenacious and committed creditor any business could face.  

“Now the government has a real vested interest in recovering owed debt - whether it be VAT, outstanding bounce back loans or CBILS borrowing - HMRC will be happy to be seen to be leading the crusade. 

“Usually HMRC can be negotiated with if a business approaches them to let them know they will have difficulty making repayments. If HMRC come knocking themselves then time to pay arrangements are more difficult to negotiate and if there are significant liabilities involved then debtor companies should be prepared to face the prospect of court action and subsequent penalties. 

“Additionally, HMRC has also recently been granted new powers to make directors and members of businesses personally liable for debts where there’s a risk the business will fold so it’s even more important than ever for business owners or directors to get advice if they are in this position.” 


Explainer - What is VAT?

VAT - or Value Added Tax - is paid by any UK business if their taxable turnover exceeds or is expected to rise above £85,000 in any 12 month period. 

If a business reaches this threshold then they have to become VAT registered although any business generating less than this can register if they choose to.  

VAT registered companies have to submit regular VAT returns so HMRC can estimate how much is owed. Returns can be submitted electronically every quarter unless the company applies for dispensation to file them manually.  

It’s important to gain this as filing paper returns without express prior permission incurs an automatic £400 fine.  

VAT returns must also be filed within one calendar month and seven days of the end of an accounting period - and the deadline for paying any VAT owed in full falls on the same date. 


What are surcharge periods and notices of assessment?

One of the things we take pride in is cutting through jargon and official terms to try and explain - in plain English - what things mean. 

With VAT, there are one or two confusing terms that crop up with regularity so we’ll do our best to go through them. 

If a business is late or non-compliant in paying VAT by the deadline, or they dont pay in full then their account is said to be in default and they may enter a surcharge period. 

This lasts for 12 months and adds penalty charges for future defaults based on a percentage of the outstanding VAT amount owed - although the business is not issued with a penalty for its first VAT default. 

If further defaults occur during the surcharge period then the percentage increases with each occasion and the initial 12 month surcharge period will be extended each time it happens. 


Act now to save your business because everything changes next month


If a company fails to submit their VAT return on time or pay the amount due then HMRC will send a VAT notice of assessment of tax. 

This is a summary of what HMRC believes should be due in VAT. 

On receipt of a notice of assessment, a business has a couple of options. 

They can send a completed VAT return and pay any owed amount; they can notify HMRC within a 30 day window if they believe the estimate is too low and produce an accurate and corrected VAT return and associated payment. 

This is important to get on top of because a company could receive a penalty for willingly paying an assessed amount they know to be lower than it should be. 

If the assessed amount is greater than you believe it should be, unfortunately there is no appeal procedure. The business should submit an accurate VAT return and pay the exact amount due. 

A business should always submit a quarterly VAT return even if it can’t afford to pay the due VAT. This shows HMRC that they are complying with requirements they can meet and prevents an excessive notice of assessment being issued. 

Not being able to pay VAT payments, PAYE arrears, bounce back loan arrears or any other debts when they come due might be a sign of a bigger issue - that the company might be insolvent or might inadvertently be guilty of wrongful trading

The most important thing to do in this situation is not to panic but to calmly get in touch with us to arrange a free initial consultation

We will go through your predicament with you in detail to understand what has transpired so far, where the business is and will report back with the options you have quickly. 

We have negotiated with HMRC on countless occasions and know that they prefer honesty and transparency. 

We do too because this will give you more room to maneuver and chance to turn things around than you might think you have. 

Our experience also tells us that the sooner you act, the better it is for everyone.

Business Rescue Expert is part of Robson Scott Associates Limited, a limited company registered in England and Wales No. 05331812, a leading independent insolvency practice, specialising in business rescue advice. The company holds professional indemnity insurance and complies with the EU Services Directive. Christopher Horner (IP no 16150) is licenced by the Insolvency Practitioners Association

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