The UK business secretary has promised HMRC will take a “cautious approach” with companies that are grappling with post-pandemic debt.
Kwasi Kwarteng wrote a letter to business groups this week that assured them the taxman would adopt “a cautious approach to enforcement of debt owed to government that will have accrued,” the Financial Times first reported.
The promise comes after restructuring and insolvency experts wrote to Kwarteng last month. In their letter, they urged him to work with HMRC and help companies that would otherwise risk collapse after the government’s emergency Covid support measures begin to taper out in July.
Business groups including the Institute of Directors and restructuring body R3 warned ministers there could be an influx of insolvencies this summer if the reduced support were coupled with an aggressive approach from HMRC.
Kwarteng told the groups in his response that HMRC would soon update its enforcement methods, so that outstanding debts could be brought into managed arrangements for Covid-torn companies.
The business secretary said using insolvency to enforce payment will remain a “last resort”.
He added the “path back to full trading will be difficult for many companies, particularly those with accrued debt and low cash reserves”.
Hospitality, retail and leisure operators last week said they are facing billions of pounds in debt after the Treasury decided it would not extend financial support measures beyond the end of June, despite the delay to ‘Freedom Day’.
HMRC and the IoD have been contacted for comment.