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Business insolvency costs the UK economy billions of pounds each year – but that is largely due to a lack of engagement from HM Revenue & Customs, according to an industry representative.

Giles Frampton, president of R3, the Association of Business Recovery Professionals, explains that HMRC’s failure to provide input on many business insolvency cases is letting down the companies involved and the nation’s taxpayers.

“HMRC is often the biggest creditor in an insolvency, but they don’t always engage with the insolvency process,” he says.

“Input from experienced creditors can really help insolvency practitioners and official receivers bring back more money, not just for the taxpayer, but for all creditors.”

He adds that engagement from creditors is also crucial in spotting incidences of fraudulent business insolvency.

According to the latest figures, HMRC lost £4.4 billion in 2012-13 due to company insolvency and individual taxpayer insolvency.

But reforms to the legal process are about to make it more difficult to recover creditors’ money from rogue company directors.

This could see a further £70 million lost by creditors from next April, according to R3 – making proper administration advice more important than ever for businesses, creditors and the wider economy.