Coronavirus

Insolvent companies cost taxpayers £250m 

Insolvent companies that were unable to pay their debts in the first six months of 2020 have cost British taxpayers almost £250m, according to Altus Group. 

The software group found that the amount paid to former members of staff was up by £133.79m in the period against the prior year, despite the Government’s furlough scheme. 

Despite the large number of employees furloughed between 1 January and 30 June 2020, the Insolvency Service paid out a total of £244.16m to former members of staff after their employer entered into either administration, liquidation, a CVA or another form of corporate insolvency.

A total of £170.39m was paid out in redundancy pay, whilst £42.67m was for money that would have been earned working a notice period. 

The balance went on holiday pay and outstanding payments, such as unpaid wages, overtime and commission, according to data released to Altus Group under the Freedom of Information Act. 

During the same period in 2019, £110.37m was paid out of the National Insurance Fund. The 121% increase in the overall claim on the fund was driven largely through high street failures following the nationwide lockdown. 

It comes as the Centre for Retail Research said there were more insolvencies at large retailers during the first half of 2020 than during the whole of 2019, with the likes of Laura Ashley, Debenhams, and Oasis & Warehouse all entering insolvency processes. 

Robert Hayton, head of property tax at Altus Group, said appeals citing the pandemic as a material change in circumstances allow businesses to have their rateable values “significantly” reduced to reflect the impact of the coronavirus.

He warned the settlement of those appeals must take place quickly ahead of the next financial year, adding: “As conditions improve, values will then be able to track those improvements ensuring fairness, a form of phasing in if you like. 

“These appeals should supplement discerning targeted additional support for viable, vibrant retail that is now struggling.”

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