Mixed messages regarding ‘time to pay’?
A recent Freedom of Information Act request revealed that Premier League and Championship Football clubs between them owed nearly £4million to HMRC under ‘Time to Pay’ (TTP) agreements. Such information may soon be a thing of the past as HMRC has advised that it is currently ‘considering the release of statistics for TTP’ and that whilst the review is ongoing it is unable to provide statistical information for the Business Payment Support Service which operates all TTP arrangements.
Since inception of the service the statistical information released by HMRC has confirmed the extent to which businesses have been able to defer taxes due, thereby providing a cash flow advantage to the recipients. HMRC has also been keen to demonstrate the high level of successfully completed arrangements. Without the availability of such information there will be little evidence to support the success or otherwise of the scheme going forward. Recent high profile administrations have revealed the existence of substantial TTP arrangements which have clearly failed and must impact upon the overall success of the scheme.
A lack of information will result in increased speculation as to the future of the scheme not withstanding HMRC is continuing to maintain that the criteria for considering TTP applications has not changed. Whilst a wholesale withdrawal of the scheme must be considered unlikely, a tightening up of the availability of credit may well be in the offing. Additional supporting information and greater monitoring of compliance in respect of applications are likely to lead fewer businesses successfully benefitting from TTP arrangements.
Such uncertainty regarding the strategy of HMRC has not been helped by what appear to be recent mixed messages relating to TTP. Since April this year HMRC has been able to insist on the receipt of an Independent Business Review where the debt involved exceeds £1million. It has recently been reported that only one such report has been delivered and that HMRC did not agree with its proposals. If this is correct then there must be further concerns about the level of recoveries likely to be achieved under the scheme.
The expectation must be that in the absence of positive support by the Government and HMRC, many businesses will fail to achieve the necessary TTP funding and others will suffer the sudden withdrawal of previously agreed facilities leading to an unwelcome increase of business failures in the months ahead. Even if that support is forthcoming, applications for TTP arrangements will be subject to greater scrutiny and hence professional assistance should be considered when making such applications to maximise the chance of success.
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: 31st August, 2010
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