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HMRC - Time to pay rejections on the rise

The previous Government's support in giving businesses time to pay their their debts to HMRC via the Business Payment Support Service (BPSS) has been widely acknowledged as having provided a lifeline to many businesses. Continued support was assured in their March 2010 Budget although from the increasing number of referrals we have seen in recent weeks there are clear signs that HMRC are taking a stricter view when dealing with outstanding debt. This experience has been supported by information released by HMRC showing there has indeed been an increase in the number of applications being rejected with the rate having risen in the three months to 31 March 2010 compared to 5.3% in the first quarter of last year.

Whilst no formal comment on the continuance of the BPSS has been made by the new Coalition Government, pressure on it to cut the national deficit will inevitably lead to greater scrutiny of all applications made under the scheme. Rejection rates are likely to continue to increase as HMRC will at best apply more stringent criteria when assessing which applications for time to pay arrangements to support. As for existing arrangements in place, breaches of such agreements are likely to lead to support being withdrawn.

As long as the BPSS remains in place it will remain a valuable source of funds for companies able to demonstrate the existence of a viable business. However, businesses that are relying upon rolling over their deferrals are taking immense risk. Alternative funding options need to be explored and be put in place before any deferral period ends. We are seeing an increasing number of businesses following this course. As is always the case the sooner matters are addressed the more likely a distressed situation can be avoided. 

Peter Godfrey-Evans is a Restructuring & Insolvency partner at Mercer & Hole. The views given in this blog are personal to the author, if you would like to discuss the contents of this post with Peter you can call him on 01908 605552. 

 

 

Date: 14th May, 2010
Author: Peter Godfrey-Evans

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