Business Secretary Kwasi Kwarteng has written to industry bodies saying that HM Revenue & Customs (HMRC) will take a “cautious approach” to enforcement of debt owed to the Government accrued during the Coronavirus pandemic.
In a letter to the Institute of Directors and restructuring body R3, Mr Kwarteng said that enforcement by the taxman will be based on whether a business has been engaging regularly with HMRC rather than due to its inability to pay. He added that HMRC would take a “flexible approach” with businesses who engage with them, to bring their debt into a managed arrangement.
Many business groups have been concerned that the ending in September of the moratorium preventing small firms from being wound up through insolvency could herald government action. They have warned that HMRC’s aggressive approach to tax collection could exacerbate the problem of bad debt.
However, while Mr Kwarteng has said that HMRC would consider the number of loans and support schemes given during the pandemic, he insisted that, where possible, HMRC would attempt to bring a business’ debts into a “managed arrangement”.
A spokesperson for HMRC has also said that pursuing insolvency action would only be a “last resort after considering all alternative routes to recovery of a debt” and that the taxman would only take action “if a customer does not respond or engage with us”.
However, Mr Kwarteng also stated that government assistance will not last indefinitely, saying that the necessary restrictions, coupled with a cross-Government approach to its sustained backing and enforcement, will be critical to a return to a healthy and functional economy.
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