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HMRC and the insolvency process

The UK’s tax system has been hot topic of conversation in parliament and the media recently, spurred by high-profile cases such as Google.

And with the influential Treasury Select Committee holding an inquiry into the UK’s tax system there’s an opportunity for the insolvency profession to share its views on HMRC. 
HMRC has a very important role to play in insolvencies. As the largest unsecured creditor in most insolvencies and as a custodian of information insolvency practitioners need to run insolvency procedures, HMRC has an important role to play in business and job rescue, as well as ensuring a smooth and swift liquidation should business rescue not be viable.
Worryingly, our recent member survey found that three-in-four (71%) insolvency practitioners say that HMRC has made the insolvency process harder to manage in the last few years.
At the heart of these difficulties are administrative delays and obstacles.  These delays are onerous for the insolvency profession and impact on the speed in which money can be returned to creditors and the ability to save jobs and rescue businesses.
R3’s members estimate that a third of the approximately 480,000 letters and forms they send to HMRC for a year’s worth of cases are duplicates of lost or ignored post, or are copies of letters they have had to send to multiple HMRC addresses. This equates to nearly 160,000 unnecessary pieces of correspondence per year.
Nearly half (49%) of insolvency practitioners had to wait longer than 15 minutes the last time they called HMRC before their call was answered, cut off or they hung up. Nearly one-in-four waited for over half an hour.
This is a burden on the resources of insolvency practitioners, half of whom say that HMRC is one of the creditors they look forward to working with the least (although 8% say the most).
Over half (54%) of insolvency practitioners had to wait over three months for clearance from HMRC to close their last case; one-in-four have waited between six months and a year.
As Office Holders, insolvency practitioners are entitled to certain information from HMRC, yet 43% have had requests for that material rejected.
That said, we were pleased to see the Chancellor announce in his Budget that £71m is to be invested in HMRC service standards. Tax offices are to be opened seven days a week and 800 new call centre staff to be recruited by 2017 to ease waiting times.
Recent announcements of changes to the structure of HMRC also provide an opportunity for improvement. Our members believe there are a number of simple measures which could be introduced that could alleviate delays in insolvency procedures, and save time and costs.
Among our proposals is the introduction of a specialist insolvency unit at HMRC which would provide a dedicated and staffed helpline to deal with all insolvency correspondence, an idea supported by nine out of ten (90%) of R3 members.
A greater emphasis on digital communication would also help, with a widespread belief amongst the profession that that the ability to correspond with HMRC in relation to individuals and companies via email (90%) and online access to filed information on all appointments (78%) would also save time and costs. We hope the government will consider these recommendations as part of its ‘Making tax digital’ programme.
We believe introducing these reforms would create a more streamlined system and greatly aid the profession in returning money cheaper and faster to creditors, including HMRC itself. 

Notes to editors:

  • R3 is the trade body for Insolvency Professionals and represents the UK’s Insolvency Practitioners.

  • R3 comments on a wide variety of personal and corporate insolvency issues. Contact the press office, or see for further information.

  • R3 promotes best practice for professionals working with financially troubled individuals and businesses; all R3 members are regulated by recognised professional bodies
  • R3 stands for 'Rescue, Recovery, and Renewal' and is also known as the Association of Business Recovery Professionals.