An alternative small business lending platform has criticised HM Revenue & Customs’ (HMRC) approach to small businesses that fall behind on tax payments, saying that the methods used to combat issues are “too aggressive”.

HMRC applied to close 4,160 businesses last year, but critics have said that this number is too high, especially as the UK faces a slowing economy and small businesses experience numerous late payment challenges. Moreover, critics have called for a more “sympathetic approach” to small and medium-sized enterprises (SMEs) that fall behind.

As one of the report’s authors commented, HMRC continues to take a hardline approach despite businesses facing economic headwinds. He added that, while the Revenue has eased back compared with last year, when they tried to shut down 4,700 businesses, it should be looking to give businesses more leeway.

Meanwhile, other reports show that regulators are cracking down on tax avoidance as well. Earlier this year, HMRC released a notice advising readers of its efforts to combat attempts to “avoid an income tax charge on distributions when winding up a company”.

According to HMRC, it is also taking measures to target “phoenixism”. This is where a business owner attempts to use cash from a closing business as capital gains and not an income tax, which is taxed at a higher rate. Those bosses then launch a new company that is similar to the previous one.

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