A West Midlands-based insolvency expert has called on the Government to drop plans to end the ‘no win, no fee’ ruling on bankruptcies in a bid to save taxpayers millions of pounds.

Richard Philpott, a partner at KPMG in the region and Midlands chairman of the R3 insolvency trade body, claims the Treasury could say goodbye to recovering huge chunks of unpaid tax each year if the rules concerning the pursuit of failed company directors change.

Mr Philpott said that Her Majesty’s Revenue & Customs could miss out on recovering millions of pounds of unpaid taxes every year if the insolvency profession’s exemption from the changes to ‘no-win, no-fee’ rule ends in 2015.

The Government’s Legal Aid, Sentencing and Punishment of Offenders Act 2012 severely curtailed the use of ‘no win, no fee’ cases from April 2013 in a bid to clampdown on “ambulance-chasing” legal practices. The insolvency profession was granted an exemption from the changes until April 2015.

Mr Philpott said: “At the moment, insolvency practitioners can use ‘no win, no fee’ rules to pursue delinquent directors of failed companies through the courts to return money to creditors, including taxpayers and small businesses.

“If the rules change, it will no longer be financially viable to take directors to court. This could leave millions of pounds out of reach of creditors to whom the money belongs. What would the Government rather have – honest businesses or discredited directors that have left creditors high and dry?”