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Pressure increases on time to pay arrangements

Statistics recently issued by HMRC for the Business Payments Support Service (BPSS) since its inception confirm there has been a 45% drop in the number of arrangements approved for the first nine months of 2010 compared to the same period of 2009, whilst the level of rejections has doubled to 5.2% over the same period. A closer inspection reveals a rejection rate of 6.9% for the three months ending September 2010, indicating a significant upward trend over the last few months.

The information released highlights other changes in ways in which the Time to Pay scheme is being used by taxpayers. Whilst over the period from inception deferrals of up to three months have accounted for 60% of all arrangements, this has increased to 73% for the third quarter of 2010. The average value of each agreement throughout the period has remained static at about £17,000 with VAT deferrals accounting for just under half of all arrangements.

The overriding message is there has been and continues to be a general tightening on the availability of funding through the Time to Pay system. Following the release of this information HMRC continue to maintain that there has been no change in the principles applied when considering applications for Time to Pay agreements. Ultimately recovery of the tax due and viability of the business are their only concerns. The current view from professionals and businesses themselves however is that HMRC are demanding more information in support of applications and expecting businesses to demonstrate that they have exhausted all other potential sources of funding. Such sources include the use of company credit cards notwithstanding the penal level of interest they carry and the potential impact on the company’s viability.

In the coming months HMRC are likely to continue to make Time to Pay arrangements available to what they deem to be viable businesses thus maintaining their argument their policy has not changed. However the change which has led to the reduced availability of funding is that they have become more inquisitive, requesting more information and not accepting all the information given at face value. As a result the viability of more businesses has been called into question.

With economic conditions unlikely to ease in the months ahead, funds from all sources will remain difficult to obtain. Extended credit from the likes of HMRC will be subject to greater scrutiny, with businesses likely only to get one chance. It is therefore essential that a sound business proposition is made which can hold up to detailed consideration. Professional assistance in putting forward requests for funding is likely to help maximise the chance of success.



Date: 6th January, 2011
Author: Peter Godfrey-Evans


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