Plans to make directors responsible for tax debts could backfire, warns Lancashire expert
Plans to make directors of failed companies personally liable for their business’s tax debts could penalise genuine entrepreneurs, a Lancashire insolvency expert has warned.
The idea from HMRC – which would apply to directors linked to two or more insolvent businesses – are designed to combat tax abuse. But Paul Barber, the North West chair of insolvency and restructuring trade body R3, says they could deter start-ups and job creation, and even catch out professionals working with struggling companies.
He will be urging the new government to rethink these and some other measures.
Paul, who is also a partner at Begbies Traynor, said: “This policy breaches the fundamental principle of ‘limited liability’ which lies at the heart of the UK corporate law and is designed to protect entrepreneurs who take risks to generate wealth for themselves and the community.
"While we understand the issue that the plans aim to address, without amendments and strict guidance on use, they could be applied much more widely than intended.
"The proposals could not only be used against unfortunate but genuine business directors, but could also discourage them from taking on staff to minimise their tax liabilities.”