Between May and June of this year, the number of incorporated businesses failing has increased mainly because connected personal service companies (PSCs) have collapsed.
The Insolvency Service said that the collapse of PSCs was the reason that the overall level of insolvencies rose during the second quarter by over 12 per cent to 4,457.
The Insolvency Service said: “This was caused by a one-off event of 1,131 connected personal service companies (PSCs) entering…[liquidation] following changes to claimable expense rules.”
It was claimed that this mass collapse of PSCs is just a one-off, but this ignores the fact that in the latter part of last year, there was another mass collapse of PSCs (some 1,706 failed).
The Insolvency Service said: “There were 1,796 company insolvencies in 2016 Q4 and 1,131 in 2017 Q2 due to one-off events.”
This would seem to refer to the introduction of T&S legislation. The T&S legislation introduced in 2016 was aimed at preventing workers who worked through an umbrella company, PSC or recruitment agency from claiming expenses for normal commuting to their place of work in order to reduce their taxable income.
However, on a more positive note, despite the number of PSCs failing, the underlying number of company insolvencies has gone down to its lowest figure since 2000.
This 17-year low was attributed to the fall in creditors’ voluntary liquidations, which was highest in the Construction, Retail and Admin and Support sectors.
The Insolvency Service said: “The underlying liquidation rate has dropped to one in 247 [companies]. Changes in company legislation rates are related to economic conditions: in periods of economic growth liquidation rates tend to decrease.”