Directors being chased by HMRC

Directors being chased by HMRC

Companies who are shutting up shop with money still owed to HMRC are contributing to the UK tax gap which was reportedly almost £40bn in the 2022/23 tax year. Now HMRC are ramping up efforts to stop this by chasing directors and other senior members of these businesses.

There were 52 notices issued last year, which is a 225% increase from the previous year. With an average bill of £290,000, this is an attempt to claw back over £15m. Although this may seem insignificant to the scale of the tax gap, increases in this are positive and will likely increase.

The previous year HMRC liability notices equated to just £2.3m, with only 16 issued.

Insolvency figures are continuing to rise, which will lead to a further increase in liability notices being issued, and possibly increasing the UK tax gap. In 2023 there were over 25,000 company insolvencies, which is the highest since 1993.

 A senior tax manager is quoted as saying: ‘HMRC is making clear that company directors whose businesses leave large unpaid tax bills behind after they close where there is evidence of deliberate behaviour will not walk away without paying up.’

‘It is clear now that they are willing to go after whichever of the directors and other individuals connected with the management of the company who has sufficient personal assets to pay.’

‘Any director of a struggling business should be taking legal advice if there’s a possibility that their company will go insolvent with substantial tax debts. There is a risk that directors of businesses in genuine financial stress could get caught up with those seeking to defraud HMRC if HMRC has good reason to believe there will be a tax liability relating to tax avoidance or evasion arrangements.’