Taxing returns for the government

Official statistics have revealed that the number of UK businesses registered to pay VAT and employees’ tax has fallen for the first time in a decade.

In March this year a total of 2.73 million businesses were signed up to pay VAT or Pay As You Earn (PAYE), the system used to collect income tax and National Insurance from employees.

According to the Office of National Statistics (ONS) that is a drop of 1.5 per cent compared to the same period last year.

Commentators say the fall reflects a surge in post-Covid insolvencies and cost-of-living pressures.

Against this worrying backdrop of rising costs and uncertain economic outlook, Insolvency Service figures also reveal that company collapses in August rose to 2,308.

It was the highest level for this month in four years and up 19 per cent year-on-year. The figure was also higher than pre-pandemic levels.

Construction, retailing and manufacturing headed the list of sectors most affected by insolvencies.

Companies were mostly declared insolvent through creditors’ voluntary liquidations, where directors of a firm agree to wind up the business without a formal court order.

Releasing the figures for England and Wales, the Insolvency Service said: “From the start of the coronavirus (Covid-19) pandemic until mid-2021, overall numbers of company insolvencies were low when compared with pre-pandemic levels.

“This is likely to have been partly driven by government measures put in place to support businesses and individuals during this time. Company insolvency numbers have now returned to and exceeded pre-pandemic levels.”

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