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HMRC adopts distraint tactics 16 July 2013

The number of petitions issued by HM Revenue & Customs (HMRC) to wind up companies and place them in liquidation has decreased 42% over the last year to reach its lowest figure in five years.

According to new figures from legal services firm Pinsent Masons, HMRC issued 3,733 petitions for winding up companies in 2012/13, compared to 6,440 in 2011/12.

Similarly, the number of winding up orders successfully obtained fell by 25% in the last year, from 3,339 to 2,541.

Serena McAllister, senior associate in restructuring at Pinsent Masons, said the figures “speak for themselves”.

She explained: “The drop in petitions to wind up companies and place them into liquidation, combined with evidence that suggests HMRC is increasing using its powers to seize business assets, show that HMRC is now using distraint as its preferred method of enforcement.

“This tactic appears to be paying off as HMRC’s recovery rate has increased significantly, which is good news for the taxpayer although not so good news for businesses.

HMRC is becoming increasingly aggressive in the use of its powers. For some companies, particularly SMEs, the seizure of its assets could be the final blow and may even force businesses into insolvency in some instances.”

Regionally, Scotland saw the largest drop in legal actions, with the number of winding up petitions issued falling by 68%. Northern Ireland and England and Wales saw respective decreases of 46% and 37%.

Ainslie Benzie, Glasgow-based senior associate in restructuring at Pinsent Masons, said: “South of the border HMRC seems to have switched tactics.

“This may be down to a lack of resources given the various other high profile cases HMRC is pursuing or simply a change in HMRC strategy here.”

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