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As HM Revenue & Customs crack down on the collection of unpaid taxes, the number of bankruptcy restriction orders is continuing to increase. Officials from HMRC are targeting small business owners who may consider bankruptcy an easier option when facing financial difficulties.

If a business owner is thought to have behaved recklessly or dishonestly, playing a large role in the financial difficulties which lead to bankruptcy, then a court will consider the issue of a bankruptcy restriction order. This can have a huge impact on the bankrupt, preventing them from accessing credit in most cases, and restricting the likelihood of taking up the directorship of a company, which could be enforced for up to 15 years.

This practice could make bankruptcy seem a less desirable option for a struggling business. Over the last year, 443 bankrupts have received bankruptcy restriction orders, while four years ago the number was 80. The orders which were issued this year amount to a 21 percent increase on 2010. According to the head of business recoveries at Wedlake Bell, Edward Starling, HMRC argues that a company which doesn’t pay the required amount of taxes in a timely manner is guilty of neglecting the business, and should therefore be served with a bankruptcy restriction order.

Starling said:

“The authorities are making an example of business owners who have allowed their businesses to run up insurmountable tax debts by banning them from involvement in senior management positions of a company for a long time.”

He also stated that the tough stance taken by HMRC was a partial reflection on the businesses entering into bankruptcy in the present financial difficulties.

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