The UK government has asked HMRC to show leniency when collecting unpaid taxes from companies struggling to cope with Covid-19-induced debt

It believes this is the only way to prevent the sway of insolvencies over the summer months, as emergency business support measurers begin to be wound down.

Business secretary Kwasi Kwarteng wrote to business groups in late June promising HMRC will be taking “a cautious approach to enforcement of debt owed to government that will have accrued”.

In the letter, to the IoD and R3, the business secretary said HMRC would be updating policy around enforcement, creating a ‘managed arrangement’ approach for those struggling to pay their tax debt.

Kwarteng also recognised that any path back to full trading will be difficult for many companies, particularly those that have accrued debt and have low cash reserves.

He explained that HMRC enforcement will be driven by a lack of engagement by companies with it, rather than just an inability to pay and that using insolvency to enforce payment will remain “a last resort”. 

That said, he stressed normal insolvency processes will need to work if we are to return to a healthy and functioning economy.