Actions By HMRC Could Be Contributing To Rise In Compulsory Winding Up Orders, Says Lawyer

A leading insolvency lawyer has warned against reading too much into today’s data from The Insolvency Service which says company insolvencies during the first three months of 2016 increased for the first time since Q1 2014.

Announcing its latest quarterly data, the Government department revealed that an estimated 3,694 companies entered insolvency in the first quarter of 2016. This was 5.4% more than Q4 2015, but significantly, 3.6% lower than the same time last year.

The main driver of the increase in total company insolvencies was the 804 companies which were subject to a compulsory winding-up order in Q1. This represented a 36% increase on the previous quarter.

Creditors’ voluntary liquidations remained fairly stable whilst CVAs were at their lowest level since Q1 1998 with just 75 in Q1 2016.

Administrations were at their lowest level since the last three months of 2003 with an estimated 301 in Q1 2016. This represented a decrease of 11.1% compared to the previous quarter and 10.9% lower than the same quarter in 2015.

The estimated liquidation rate in the 12 months ending Q1 2016 was 0.42% of active companies - the lowest level since comparable records began in Q4 1984.

Expert Opinion

“Although company insolvencies have increased in the first quarter of 2016 compared to the end of 2015, it’s far more accurate to make seasonal comparison and here we see that numbers of insolvencies are still lower in the first three months of 2016 compared to the start of 2015. The increase in Compulsory Winding Up Orders has clearly had a big influence on the numbers in the most recent statistics, but it may actually reflect an increase in activity from HMRC who are less willing to wait for their money than in previous years.” Edward Judge - Partner