Figures from the Insolvency Service reveal that in the year to March 31 2011, bankruptcy restriction orders or equivalent undertakings were obtained against 443 bankrupts because of neglect of their business - a majority of which were alleged to have consistently failed to pay taxes to HMRC.
This was an increase of 21% on last year (2009/2010) and concern actions taken against sole traders and partnerships. It is also a significant rise on 140 BROs due to neglect of business affairs in 2008/2009 and just 80 in 2007/2008.
Bankruptcy restriction orders can prevent individuals from becoming a director of a company for up to 15 years.
Edward Starling, head of business recoveries at Wedlake Bell, said: “Personal bankruptcy is sometimes regarded as a means to a fresh start. But with HMRC and the official receiver taking an increasingly tough stance, it would be very dangerous to underestimate the long term consequences of being an owner of a bankrupt business.”
“The authorities are making an example out of business owners who have allowed their businesses to run up insurmountable tax debts by banning them from involvement in senior management positions of a company for a long time.”
The lawyer claimed that business owners who find their businesses in serious financial difficulties need to face the possibility of bankruptcy at an early stage
“These figures show that too many owners are burying their heads in the sand and kidding themselves and their creditors that everything is going to be alright.”
Starling added: “HMRC is typically the last creditor to get paid where a business goes bust. Given the state of the public finances, the government is keener than ever to minimise any non-payment of tax and HMRC will want to send a strong signal to the owners of struggling firms that if their businesses collapse without paying tax, they cannot expect any leniency.”