COVID-19: HMRC will take ‘cautious approach’ clawing back money struggling firms owe to taxpayer

Struggling firms that owe money to the taxpayer have been reassured that authorities will take a “cautious approach” to clawing it back.

Business Secretary Kwasi Kwarteng has written to the Institute of Directors and insolvency trade body R3 after they raised concerns about embattled businesses which have HM Revenue and Customs (HMRC) as a major creditor.

Many of them have also built up debts as a result of loans and support schemes offered during the pandemic.

Mr Kwarteng said HMRC “will take a cautious approach to enforcement of debt owed to the government that will have accrued during this period”.

The business secretary added: “It is right that where government has stepped up, through the general taxpayer, to support the economy during this national emergency, that business should do all it can to pay its fair share of taxes and repay back loans where it can.”

But Mr Kwarteng added, in a letter dated last week, that enforcement of debt was more likely to take place when companies failed to engage with HMRC rather than simply because they could not afford to pay.

He said using insolvency processes to enforce payment would “remain a last resort”.

“A flexible approach will be taken with those companies who engage with HMRC, with a view to bringing their debt into a managed arrangement,” Mr Kwarteng said.

The government has spent billions shoring up businesses during lockdowns via the furlough jobs subsidy initiative as well as a series of loan schemes – helping to push borrowing for the last financial year to the highest level since the Second World War and lifting debt above £2trn.

Much of the help is about to start tapering off – even as the end of lockdown is delayed – although one measure, a moratorium on commercial evictions, has been extended into next year.

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