Some businesses are facing bills of £100,000 before being able to recommence trading. HMRC is particularly targetting pre-pack administrations, which often see the crown write-off large PAYE and VAT debts.
HMRC has revived a little-known VAT law to demand from these companies a penalty fee or “security for future VAT”. The amount owed is calculated using a registration form on which the entrepreneur declares estimated future revenue.
Stephen Alamabritis, of the Federation of Small Businesses urged the Government to “take its foot off this particular pedal and allow businesses, where there is no proven fraud or criminal activity involved, to set up again in the normal way”.
HMRC says that it has issued nearly 2,000 fines since April last year, but that the purpose was “not to prevent businesses from trading but to protect risk to future revenue to the Exchequer and encourage compliance”.