Companies shutting down while still owing significant sums to HMRC are contributing to the UK’s growing tax gap, which reached nearly £40 billion in the 2022/23 tax year. HMRC has intensified efforts to hold directors and senior management accountable for unpaid taxes.
Last year, HMRC issued 52 joint and several liability notices – a sharp 225% increase from the previous year. With the average notice amounting to £290,000, HMRC seeks to recover over £15 million. While this sum is small compared to the overall tax gap, the rise in liability notices is a positive step and is expected to continue increasing.
In contrast, the previous year saw only 16 notices, totalling £2.3m. In extreme cases, directors of insolvent companies could face severe consequences, such as losing their homes, as they struggle to repay hefty bills.
The rising number of company insolvencies will likely lead to more liability notices being issued, further straining the tax system. In 2023 alone, there were 25,158 company insolvencies – the highest recorded figure since 1993. This growing trend could have serious implications for the tax gap and the future of many business leaders.
Talk to us about your taxes.