Tax time bomb
Published: 04 August, 2009
MANCHESTER: A tax time bomb threatens to increase business failures.
Insolvency expert, Graeme Jump, at law firm Mace & Jones, warned small firms of a second wave of business collapses in the autumn.
"There has been a slight drop in insolvencies but this masks deep problems," he said. "A number of vulnerable businesses have been slashing costs by redundancies, operational cuts, and grabbing the government's offer of delaying payments for such taxes as PAYE, VAT, and corporation tax. That six month tax-holiday already amounts to billions in delayed payments and will soon expire leaving many businesses exposed to urgent demands from the taxman."
Insolvencies in the northwest dropped to 35 in June compared to an average of 48 per month since the start of the year. The first six months of the year saw 10,242 companies become insolvent, up 33.8% on the same period in 2008.
Jump urged any firm facing problems to take insolvency advice as early as possible. "Businesses exposed to 'discretionary expenditure' are at risk in that second-wave of autumn failures. It is vital to take advice early," he said.
Jump also predicted a third-wave of business failures next year. "When the property market picks up, some lenders might decide to pull the rug on ailing companies when they see the opportunity to get better prices for properties used as collateral," he warned.
"That third wave will also be swelled by companies that, without sufficient working capital, start to overtrade as the recovery begins. This is the moment for companies to engage recovery advice, rather than become another statistic," he said.