Tax body denies action on struggling Scots firms is unfair


By Rory Reynolds

THE government’s tax collector has denied claims that it is forcing firms to the wall after it was attacked for axing struggling Scottish businesses.

New figures have revealed that HM Revenue and Customs forced a Scots firm to close almost every working day for two years for failing to pay their bills on time.

The public body was responsible for nearly a quarter of all corporate insolvencies north of the border in 2008 and caused 212 in 2009.

HMRC has been criticised for refusing to budge on short term defaults on tax payments and urged to ease up on firms that are struggling due to the recession.

One critic said: “There must be thousands of people in Scotland who are out of work right now because of HMRC policies.”

While one company boss, who says he had full order book going into 2011, said he had “months of hell” trying to persuade HMRC not to close him down over late tax payments.


However, last night a spokesman for HM Revenue and Customs said that they offered firms that were having trouble paying tax and National Insurance all the help they could and did not take the decision to close a company lightly.

The new figures come less than a fortnight after the Chancellor insisted that the “time to pay” scheme he announced last year had eased the pressure on firms.

As well as action leading to the collapse of hundreds of companies, HMRC also secured orders for the sequestration – the Scots term for bankruptcy – for 1,917 individuals, among them sole traders and self-employed workers.

The same action has also led to several large firms going into administration, including Highland Airways, who owed £500,000 in tax, and rail engineering firm Jarvis, who employed more than 1,000 workers.


Danny Alexander, MP for Inverness, Nairn, Badenoch and Strathspey, said there are now serious concerns over the closure of firms that could survive, despite the state having to pay unemployment benefits for the workers they make redundant.

He said: “There must be thousands of people in Scotland who are out of work right now because of HMRC policies.

“I was astounded by what happened to Highland Airways. They had a prospective partner who would have rescued the business.

“The main issue they had was their tax debt, which HMRC said had to be paid back within a year.

“All the other public sector bodies [that were owed money] were playing ball – there was good will on all sides except HMRC.”

Gone under

Among the thousands of firms that have gone under during the recession are Skye-based Gaeltec, which went into administration last week owing £24,000 in National Insurance contributions.

The medical electronics company’s 12 employees lost their jobs after HM Revenue and Customs refused to wait to receive their outstanding bill.

Despite being set up nearly 40 years ago with government aid, Syd Johnson, Gaeltec’s managing director, said: “HMRC just would not budge.

“It is now costing them a lot more because all the people we have made redundant are now getting benefits.

“We reckon it is going to cost more than £100,000 in redundancy alone.

“We just didn’t have the cash flow to pay the debt, which stemmed from 2008. HMRC would not give us any longer to pay it.”

Tough sanctions

Mike Weir, SNP spokesman on the economy in Westminster and a former solicitor, said firms north of the border faced “mixed picture” from HM Revenue and Customs, with some being given leeway and others facing tough sanctions.

He said: “It doesn’t make sense to put businesses into administration for small debts.

“The Revenue may get some of its money back, but other creditors, suppliers and so on, probably won’t.

“And the Treasury will lose revenue in tax and national insurance from the people who lose their jobs.”


Last night a spokesman for HM Revenue and Customs said: “HMRC remains absolutely committed to demonstrating a sympathetic approach to business that have genuine short term difficulties in paying the tax they owe.

“Indeed HMRC’s Business Payment Support Service enables businesses to engage with us to try and find a solution to their tax debt problems.

“However, where we believe a business is no longer viable HMRC have a duty to the Exchequer to due collect taxes, and so may look to take further action, however this is not a course we take lightly.”