Commenting on the Scottish Insolvency Statistics, Q4 2015-16, Tim Cooper, Chair of R3 in Scotland, the insolvency trade body says:
“Corporate insolvencies are continuing their downward trend, and have fallen again this quarter.
“While we are seeing considerable distress in the oil and gas sector, many of these businesses are in a period of restructuring rather than going through formal insolvency procedures. Those businesses that were hardest hit by the downturn may have already been through an insolvency process, while the oil price has slowly started to recover. Unfortunately for many SME businesses both directly in the oil and gas sector, and the wider North East, it may be too late.
“At the same time, many other businesses in Scotland are experiencing marginal increases in employment and profitability. The current environment of record low interest rates and inflation is helping businesses to keep on top of their finances.
“These are preferable circumstances for businesses but we don’t know how long they’ll last. We do know it won’t be forever and a rise in rates will come. Businesses need to be prepared because even a small increase can have a big impact if you’re already struggling.
“Those experiencing financial difficulty should seek professional advice early in order to ensure the best chance of a successful turnaround.”
Member’s Voluntary Liquidations
A Member’s Voluntary Liquidation (MVL) is where the shareholders of a solvent company adopt a voluntary winding up resolution and appoint a liquidator to realise the assets of the business in order to distribute the proceeds to company members. They are not included in the total number of corporate insolvencies.
The number of Member’s Voluntary Liquidations (MVLs) has increased by 88.4% this quarter.
Since April 5th Entrepreneurs’ Relief is not available to those who sell or liquidate their company and then continue to undertake a similar trade or activity during the next two years. This is designed to stop business owners avoiding higher taxes on income or dividends by storing up funds in their company, going through a solvent liquidation and claiming Entrepreneurs’ Relief on Capital Gains before setting up a new company to carry on their work.
Tim Cooper adds: “There has been a marked increase in the number of MVLs in the last number of months, leading up to the April changes in Entrepreneurs’ Relief. Business owners will have been keen to ‘cash out’ their business while they still can without being penalised.”
“Personal insolvencies have been falling in Scotland over the last number of years, and this quarter is down on the last.
“It’s welcome to see that the recent downturn in the oil and gas industry, and the impact of that on related sectors, haven’t translated into unmanageable pressures on people’s finances. Hopefully the low inflation and interest rates are still going some way to help ease the pain.
“But it is important for people to stay on top of their money. R3’s latest research showed that only one-in-two (55%) Scots make a household budget at least monthly. Many people may begin to feel increased pressure on their purse strings so it’s important to plan ahead.
“It’s also worth remembering the official statistics don’t tell the whole story. There are thousands of people in non-statutory debt management plans which aren’t recorded. Consumer debt is a growing problem but without records it’s impossible to grasp the true extent of the issue.”