Small Talk: Taxman is cracking down hard on the small companies with very little hope

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The Independent Online

Is the taxman getting tough on small businesses struggling to pay their bills? HM Revenue & Customs' own figures suggest this may well be the case.HMRC's data, crunched by Wilkins Kennedy, the accountant, reveals that in the 2011-12 tax year, it presented 57 per cent more petitions to wind up companies with unpaid tax bills than in the previous 12 months. It sought to liquidate just over 5,300 companies last year, up from about 3,400 in 2010-11.

The get-tough approach is evident elsewhere in the data too. Syscap, the independent finance provider, points out that HMRC's use of 'distraint' doubled during the 2011-12 tax year.Distraint, in which HMRC seizes goods from companies with unpaid taxes – it is then entitled to sell them if the bill is not paid within five days – is an aggressive tactic that has most often been used against businesses with unpaid payroll taxes such as income tax and National Insurance. It appears to have been used more widely last year, with 10,577 businesses hit, up from 5,520 in the 2010-11 financial year.

HMRC points out that it tries to be sympathetic to businesses struggling to pay their tax bills. In particular, the Time to Pay scheme, which was ramped up during the recession and continues to this day, offers firms the chance to spread tax payments over a much longer period than usual.

However, there has been some grumbling in recent months from accountants convinced the taxman is now far more likely to reject applications from businesses for extra time. This may suggest the more hardline approach implied by the data available for the period up to April last year, when the 2011-12 tax year came to an end, has continued since then.

We don't know exactly how many businesses are now on the Time to Pay scheme because HMRC stopped publishing the statistics in 2011 (in fairness, only after a three-month consultation period during which no one complained about the proposal). However, in the final quarter before the statistics were dropped, rejections of Time to Pay applications rose by a third, which suggests that even then HMRC may have been beginning to run out of patience.

Should we be concerned about a tougher HMRC? Well, firms with cashflow constraints and squeezed finances certainly should be – many companies have gone out of business because of their inability to pay tax bills and an attack from HMRC is a very real threat. Taxpayers, however, may see this issue a different way (unless they happen to be employed by an SME in danger of going under). The number of hugely indebted companies that have no viable future but are staying alive thanks to low interest rates and forbearance from their banks – the zombie businesses – is so large that it may be holding back the economic recovery.

Might it not be better for the taxman to take what it can get now, rather than allowing the zombies to soldier on, taking business from more viable rivals, including start-ups? The sudden spike in high-profile retail collapses suggests the banks may be moving towards this position too, cutting their losses sooner rather than later.

HMRC's responsibility is to the Treasury, whose coffers are as empty as ever. There is an argument for looking sympathetically on businesses caught out in the short term, if they have the opportunity to be generous contributors to those coffers once they have recovered. HMRC appears to be taking the view, however, that an increasing number of businesses will never fulfil that potential.

Market's demise a plus for rivals

The demise of the Plus Markets business last year continues to be a boon to rival exchanges, which have been steadily picking up business over the past 12 months. Though the exchange run by Plus was sold to Icap, where many of its companies continue to trade on the Icap Securities and Derivatives Exchange (ISDX), rivals are catching up with it.

Those rivals are led by GXG Group, which bills itself as a pan-European stock exchange for small and medium-sized enterprises. It now lists 73 companies across three market platforms, and saw almost £200m of share trading last year – 17 businesses listed on GXG in January alone.

ISDX lists in the region of 135 companies, including some of the best-known inhabitants of Plus, such as Arsenal Football Club and the Shepherd Neame brewing business, which have stayed with the market through its change of ownership and rebranding.

Alkane set for fracking lift

Alkane Energy, the Alternative Investment Market-listed power group best-known for its interests in Wales, the Midlands and the North of England, could be one beneficiary of the Government's announcement in December that it will allow fracking. The controversial technique may enable resources companies to get at the UK's substantial shale gas reserves.

Alkane revealed on Friday that it has begun evaluating its shale gas assets, which could potentially give the group a substantial boost. Joe Stokeld, a mining analyst at Alkane's house broker VSA Capital, which maintains a buy recommendation on the stock, says the company's relatively substantial shale gas opportunities come on top of already solid output growth.

"Alkane seems poised to benefit from any positive developments that take place in the UK shale gas sector, if it should choose to enter it," Mr Stokeld said.

Alkane shares closed at 27.75p on Friday.

Small Business Woman of the Week: Brynne Herbert, founder, MOVE Guides

I started out as an investment banker and worked across Asia. Then I came to the UK to do an MBA at London Business School. Every time I moved, it was a huge pain logistically and it felt like opportunities that should have been exciting became daunting. When I arrived in London, I ended up in a miserable flat with no power, no bank account and no mobile.

That's where the idea for MOVE Guides came from. It started as a guide book I put together while I was doing my MBA but evolved into something more holistic. We offer a business-to-business, cloud-based portal for employee relocation and a consumer website aimed at individuals.

Some relocation services focus on high-value families but the feedback is variable and no one serves Generation Y people, who want to be able to do all this online. We take much of the customer service responsibility and serve as a single point of contact.

We raised £400,000 of business angel funding last year from people like Sherry Coutu and Kevin Eyres [the well-known technology investor and the LinkedIn executive respectively] and within six months of that we were beginning to see revenues increase. We'll probably have another funding round this year so we can scale up the business.