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Relief for accountants as insolvencies fall


Personal insolvencies fell to a nine-year low in 2014.

Those seeking accountancy jobs that deal with the finances of the self-employed are likely to be well aware of the impacts of the recent economic crisis.

One of these has been a greater determination of the government to crack down on those who find creative ways to avoid paying tax, particularly high net worth individuals.

However, for many others accountants have been dealing with imperilled finances that have been in danger of plunging into a black hole.

Ultimately, for some such a fate has proved unavoidable, with rising personal insolvencies always a consequence of an economic downturn.

However, with the economy enjoying growth of 2.6 per cent last year - the best figures since 2007 - it may come as little surprise that this particular problem has diminished.

The Insolvency Service has published its latest figures, showing that the number of people becoming bankrupt, taking on an individual voluntary arrangement (IVA) or a debt relief order dipped below the 100,000 mark for the first time since 2005, with 99,200 suffering one of these fates.

It represents a fall of two per cent from 2013 and the fourth year in a row that the figures have fallen.

Of course, there is a certain logic in suggesting that the individuals whose finances were weakest would have gone into insolvency years ago as the crisis took hold, meaning the tally was sure to diminish, but the fact is the improving commercial climate was sure to have benefits.

Indeed, it was even better for companies, with a 24 per cent fall in insolvencies since 2013.

However, for those struggling financially, the form of insolvency has changed in nature. While bankruptcies and debt relief orders fell last year, IVAs rose to their highest level on record since they were introduced in 1987.

This may suggest there is a clear desire of some to try to pay back at least part of their debt, rather than try to 'wipe the slate clean' with bankruptcy, despite the credit black mark consequences that come with the latter step.

As taking an IVA will still have a ruinous impact on an individuals' credit rating, it may be some individuals are taking this step with an over-optimistic view of their future creditworthiness.

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