Failing companies lead to £2m GST loss

Monday 01 April 2019

Local companies failing or going bankrupt have caused the public purse to lose nearly £2million in GST takings in recent years.

The figures emerged in response to a recent Freedom of Information request relating to ‘unrecoverable GST’ – Goods and Services Tax owed by businesses that should have been collected and passed onto Revenue Jersey (RJ), which was previously known as the Taxes Office.

In cases where RJ think they might not receive the money owed, they make a 'provision.' Between 2015 and 2018, GST debt provisions amounted to £3.5 million, with 2015 and 2017 totalling over £2.6 million.

A government spokesperson explained: “A 100% provision means Revenue Jersey does not expect to get any of the money. This is likely when a business is bankrupt or about to go bankrupt. 

“If the business manages to recover, or RJ receives money from the liquidators, then less money needs to be written off.”

The figures show that in the same period nearly £2million of GST debt had to be written off. Nearly £1million was written off in 2015 alone. That year, four companies accounted for more than £250,000, including one company that had more than £100,000 written off.

“In 2015 and 2018 there were a number of companies declared bankrupt or liquidated, and the GST for multiple years was written off," the spokesperson added.

Pictured: The figures show how much GST debt could not be recovered by the Government.

Spikes in the numbers were said to have been caused by a number of major companies “teetering” around that time. Some have since recovered and made arrangements to settle their debts, but others didn’t pull through and had to have their debts written off.

Larger numbers were written off in 2015 due to a shift in policy, as the spokesperson explained: “Previously when a company went into liquidation, Treasury retained the debt on the system and raised a 100% provision against it until the liquidation was complete. Any balance due, less amount recovered in the liquidation, was then written off. 

“At the end of 2015, the Treasury started to show the debt as written off as the company had either failed, was struck off or was in the process of liquidation with little prospect of recovery. These debts were written off before the year-end.”

Retail is the sector that generates the most money in terms of GST each year, totalling over £40million in 2018. Of this, around £14million was food retail alone.