‘Shadow insolvencies’ could have cost HMRC and creditors up to £200m in the last year, according to accountancy firm Moore Stephens.
‘Shadow insolvencies’ occur when businesses become insolvent disclosing no assets upon entering liquidation, meaning there is nothing to pay back to out-of-pocket creditors.
Research from Moore Stephens estimates as many as 3,000 businesses could have entered a ‘shadow insolvency’ over the last 12 months, resulting in a possible loss of £200m for HMRC and creditors.
Moore Stephens said the process means there are less companies registered as liquidated through a formal insolvency process, meaning “the true scale of the problem is likely to be far greater, as are the losses that creditors are undoubtedly suffering as a result.”
David Elliott, partner at Moore Stephens, said: “Too many businesses are disappearing with no assets and creditors must be concerned as to why that is the case.
“An increased budget for investigation work carried out by the Insolvency Service against suspect company directors would send out a powerful message to discourage unscrupulous behaviour in the first place.
“This would help to create a level playing field for businesses that publish regular accounts and that don’t try to play the system.”