As the UK faces a 20-year high in insolvency rates, Clarke Bell, a leading insolvency firm, warns that the forthcoming Autumn Budget could exacerbate the financial challenges confronting many businesses. Scheduled for 30th October 2024, the Budget is expected to unveil tax changes and spending cuts that could further strain small to medium-sized enterprises (SMEs), potentially leading to a wave of liquidations.
The current landscape is grim, with businesses now three times more likely to enter liquidation than they were before the pandemic. Clarke Bell urges company directors to take prompt action by considering options such as Creditors’ Voluntary Liquidation (CVL) and Members’ Voluntary Liquidation (MVL) before it is too late.
Increasing operational costs, high interest rates, and persistent inflation have already created a challenging environment for business owners, contributing to a 1.7% decline in business confidence in 2024. The upcoming Budget may introduce further fiscal measures that could deepen the crisis. Among these potential changes are:
- Modifications to Capital Gains Tax (CGT), which could align rates with income tax and reduce available reliefs.
- Increases to Employer National Insurance contributions, which would raise operational expenses for businesses.
John Bell, a Licensed Insolvency Practitioner and Senior Partner at Clarke Bell, emphasised the severity of the situation. “With insolvency rates at record levels, the combination of existing financial pressures and new measures from the Autumn Budget could lead to a significant rise in business closures. Directors need to act now to explore their options,” he stated.
For solvent companies considering closure, Clarke Bell’s MVL service offers a tax-efficient solution. However, with potential alterations to CGT and Business Asset Disposal Relief (previously known as Entrepreneurs’ Relief) looming in the Budget, delaying the process could result in higher tax liabilities for business owners.
John Bell further elaborated, “Directors planning to close their solvent companies should act swiftly, particularly in light of expected changes to Capital Gains Tax and BADR. Our MVL service ensures they can extract maximum value in a tax-efficient manner before any potential tax increases are implemented.”
For businesses struggling with unsustainable debt, Clarke Bell’s CVL service presents a structured and responsible means to cease operations. This process allows directors to take control while safeguarding themselves from legal repercussions associated with insolvency.
Bell noted an uptick in inquiries from directors seeking advice on CVL. “We’ve seen an increasing number of directors reaching out for advice on CVL. The process offers a solution for businesses that can no longer meet their financial obligations, helping directors close their companies in an orderly fashion,” he explained.
As the Autumn Budget approaches, Clarke Bell remains committed to providing expert advice to businesses navigating these turbulent times. Whether a company is solvent and seeking an efficient closure through MVL or facing financial difficulties and considering CVL, Clarke Bell is dedicated to helping directors identify the best course of action for their unique situations.