The Insolvency Service statistics for the quarter October to December 2018 for England and Wales show that personal insolvencies are at their highest since 2011 and company insolvencies are also on the increase.
Total personal insolvencies increased for the third consecutive year to 115,299, the highest since 2011, driven by increases in individual voluntary arrangements (IVAs) which reached their highest annual total on record.
Company insolvencies at 17,439 were their highest since 2014 with all types of company insolvency higher in 2018 than 2017 except administrative receivership.
In terms of personal insolvencies, IVAs are often used to deal with consumer debts but they may not always be the most appropriate financial solution. Whilst many people see an IVA as a quick fix, they fail to realise the long-term effects. An IVA shows on credit reports for six years which affects the ability to secure personal finance, property agreements and services such as utilities.
With regard company insolvencies, the underlying cause for the rise is being explained by some as being the result of a ‘bulk insolvency event’ related to IR35 – the tax reform implemented to prevent Tax and NIC avoidance through the use of Personal Service Companies (PSCs).
It has been widely reported in the media that a number of high profile news readers and TV presenters for example used PSCs to manage their tax liabilities. Many have liquidated their companies on the back of IR35 as they say the changes made their companyʼs activities unviable.
Excluding these ‘bulk insolvencies’ though there were still 16,090 company insolvencies in 2018, which was a 10.0% increase on 2017 so the increase can’t simply be blamed on this event.
If you or your company are experiencing cash flow problems or showing signs of distress or insolvency it is vital that you seek advice as soon as possible. Cowgills Business Recovery’s turnaround and recovery team has a long standing experience of dealing with all forms of corporate and individual insolvency arrangements so please get in touch if you need advice.