HM Revenue & Customs has reportedly started disqualification proceedings against a number of directors of insolvent companies, placing some doubt on the claims that there will be some leniency shown towards companies with cash flow problems.

There were 813 directors facing proceedings launched by HM Revenue & Customs (HMRC) as a result of not paying their company’s taxes. This is a huge increase compared to the 654 directors the preceding year. Following the claim of leniency towards companies who are facing financial difficulties, this is an unprecedented increase of 24% in disqualification cases.

The Chief Executive of Syscap, the company who gathered the statistics, Philip White expressed his concern at the huge increase in action taken against directors of companies facing insolvency. The Chief Executive also stated that this increase in court proceedings should serve as a warning to limited company directors who are experiencing financial difficulties.

Once a disqualification order is in place, the directors concerned will face a ban of up to 15 years which will prevent them from setting up, managing or being involved in the promotion of a limited company during this time. This could have a serious effect upon the directors, especially as disqualified directors face complete liability for the company losses as well as facing criminal liability proceedings.

Directors of limited companies often pay suppliers as a priority, hoping to keep their companies afloat during hard times but not paying the HMRC is a huge mistake, especially if the company becomes insolvent.

As HMRC is cracking down on tax evasion and avoidance, it is advisable that any payments due to HMRC are paid as a priority. For contractors who are unsure of the rules surrounding IR35 legislation and other issues such as expenses, a reputable umbrella company can ensure that you stay on the right side of HMRC.