HMRC cracking down on tax avoidance/tax migration schemes

The Finance Act 2014, which became law in July, is threatening some companies with insolvency.

The Act creates new powers which are designed to target individuals and companies which have taken advantage of tax avoidance/tax mitigation schemes. HMRC now has the power to look back over the last ten years and issue demands for payments ‘on account’ pending determination of whether or not the tax scheme is lawful. These so-called ‘Accelerated Payment Notices’ could, for some, amount to millions of pounds.

A number of high profile celebrities have already been hung out to dry by the media for taking advantage of ‘tax loopholes’, provoking the response by David Cameron that it was “morally wrong”.  But wherever the blame lies, over in the corporate arena, companies which face huge demands from HMRC are going to find themselves in significant difficulty, which equally could create problems for their directors personally.

Birkett Long’s insolvency law team has already seen directors whose companies will be unable to pay the impending demands and therefore are now technically insolvent. There are far-reaching effects for directors, management, employees, customers, suppliers and shareholders if a business fails. The directors of the business will need timely advice on the best way forward in these situations, be it a corporate rescue or restructure, a pre-pack administration or, in many instances, a voluntary liquidation.

The team has been able to guide the directors of these companies through the legal minefield, making sure they do not fall foul of other laws such as wrongful trading, misfeasance or preferences (where a company makes payments to some creditors ahead of others) as well as minimising or eliminating the risk of directors disqualification proceedings. They have also assisted such directors in the setting up of their new businesses, providing advice on whether and how they can trade with the same or a similar name to the old company, as well as advising on the acquisition of the assets of the old company from the liquidator.

The author, Kevin Sullivan, is a partner at Birkett Long LLP.  He specialises in contentious insolvency and is recognised in the legal directory, Chambers UK, as a ‘key individual’ in this area of work.  Kevin acts for business clients and insolvency practitioners, and is particularly experienced in successfully defending directors facing proceedings under the Company Directors Disqualification Act 1986. He holds the Certificate of Proficiency in Insolvency and is a member of the Association of Business Recovery Professionals, R3.