Worries over business survivals if tax payment scheme closes

A significant number of businesses could face severe financial trouble if the Government's time to pay scheme were to be wound up.  The Business Payment Support Service (BPSS) was set up by the Chancellor to allow businesses with cashflow difficulties to negotiate a timetable for settling PAYE, corporation and income tax bills; the BPSS was further extended by Alistair Darling in his pre-Budget Report.

So far, some 160,000 businesses who employ 1.2 million people have used the time to pay scheme, deferring payment of £4.8 billion in taxes.  Of that figure  £3.69 billion has already been repaid.  However, any premature closure of the scheme could push many businesses under should this lifeline be withdrawn.

Business failures dropped during the last quarter of 2009; down by 1.7 per cent compared with the previous quarter and 1.1 per cent down on the same period a year ago.  But the fear from our business recovery and insolvency team is that the withdrawal of the BPSS could herald a surge of firms forced into liquidation as they struggle to pay their deferred tax demands.

Whilst the government has indicated there will be no sudden closure of the scheme it is becoming increasingly difficult for businesses to obtain a time to pay arrangement without expert professional help.  We have helped many clients defer millions of pounds with realistic and achievable time to pay arrangements.

Insolvency practitioners look poised to play a much more significant role in the time to pay process in the future.  HMRC are in the process of introducing a requirement that businesses seeking time to pay arrangements for a debt of over £1 million are to provide an Independent Business Review (IBR) in support of their request.  They are hoping to introduce this requirement early this year and have proposed that insolvency practitioners carry out the IBRs.

If you are concerned about your debt to HMRC and are considering a time to pay arrangement then please contact Diane Hill at dhill@clbcoopers.co.uk or call 0161 245 1000.