Clarke Bell, a prominent insolvency firm, has raised alarms regarding the potential impact of the upcoming Autumn Budget on UK businesses. With insolvency rates currently at a 20-year high, the firm warns that the Budget, scheduled for 30th October 2024, could exacerbate financial distress among companies, especially small to medium-sized enterprises (SMEs).
As businesses grapple with the fallout from the pandemic, the impending Autumn Budget may introduce significant tax changes and spending cuts, which could trigger a wave of liquidations. Recent data indicates that companies are now three times more likely to face liquidation compared to pre-pandemic levels, highlighting the urgent need for directors to take proactive measures.
Rising Operational Pressures
Clarke Bell notes that the economic landscape is increasingly precarious. Business owners are confronting rising operational costs, soaring interest rates, and persistent inflation, all of which are straining their financial viability. Business confidence has already declined by 1.7% in 2024, indicating a growing sense of uncertainty in the market.
In light of these pressures, Clarke Bell is urging company directors to explore options such as Creditors’ Voluntary Liquidation (CVL) and Members’ Voluntary Liquidation (MVL) before the Budget’s potential ramifications take effect. John Bell, a Licensed Insolvency Practitioner and Senior Partner at Clarke Bell, emphasised the importance of swift action:
“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.”
Anticipated Changes in the Budget
The government is expected to introduce fiscal measures that could add to the financial burden facing struggling companies. Among these changes are:
- Adjustments to Capital Gains Tax (CGT), potentially aligning it with income tax rates and reducing available reliefs.
- Increases to Employer National Insurance contributions, which would raise operating costs for businesses.
For solvent companies considering closure, Clarke Bell’s MVL service offers a tax-efficient exit strategy. However, with anticipated changes to CGT and Business Asset Disposal Relief (previously known as Entrepreneurs’ Relief), delaying this process may result in higher tax liabilities for business owners.
John Bell advises: Company directors intending to wind down their solvent businesses must take prompt action, especially considering the anticipated adjustments to Capital Gains Tax and Business Asset Disposal Relief. Our MVL service ensures they can extract maximum value in a tax-efficient manner before any potential tax increases are implemented.”
Solutions for Financial Distress
For companies burdened by unsustainable debt, Clarke Bell’s CVL service provides a structured and responsible approach to winding down operations. This process allows directors to regain control while safeguarding themselves from legal repercussions.
“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,” John Bell added.
Conclusion
As the Autumn Budget looms, Clarke Bell remains committed to offering expert guidance to businesses navigating these challenging times. Whether a company is solvent and seeking an efficient closure through MVL or facing financial turmoil and needing to consider CVL, Clarke Bell is dedicated to helping directors identify the most appropriate solutions for their unique circumstances.