Taxman holds firm after rise in time-to-pay arrangements

The taxman is doing its own version of a bailout for UK businesses struggling in the current hostile climate.

Some would say this is a lot more worthy than the boost given to certain financial institutions, but how long can the taxman continue propping them up as the number of SMEs looking to defer their tax bills shows no sign of abating?

As of 27 September, 210,000 time-to­pay arrangements have been set up, putting £3.71bn of cash in limbo. This includes secondary businesses such as trading partners and suppliers dependent on 150,000 companies taking up the system.

However, HMRC is now also dealing with requests for repeat deferrals and exact numbers were not available.

“Our current numbers are being validated and we therefore have no figures to give at present,” a spokeswoman said.

According to insolvency experts, HMRC is now coming down harder on deferral applications as the amount of money being kept out of the coffers keeps piling up, while balancing this against helping companies to stave off the administration axe.

Rik Heap, director of LC Corporate Strategies at insolvency specialists Leonard Curtis, said HMRC remained largely supportive of SMEs but warned that the collectors were looking to maximise the tax take by demanding extremely robust business plans.

“If a business plan fails to meet the required standard and a business fails to pay its monthly tax installments the taxman may now come down very hard,” said Heap.

Many businesses have increased Crown arrears at an alarming rate and HMRC has realised there is a very large UK plc debt that needs to be paid.”

The Business Payment Support Service was already extensive when it kicked off last November but its scope was expanded as economic conditions worsened. Today, 60% of the arrangements have a limit of three months, HMRC said, but new applicants may find it harder to secure the arrangements. “Business owners therefore have to submit a repayment plan that is spot on first time,” added Heap. "Any plan must be workable, robust and deliverable.”

Despite the clampdown HMRC has vowed to keep the scheme going for as long as is necessary. “HMRC will maintain the BPSS helpline for as long as there is need to do so.”

IN OUR VIEW

HMRC is clearly doing the right thing, but there must come a time when the taxman says enough is enough. Maintaining the delicate balance between keeping companies afloat and getting them to pay their dues is a dilemma no one will envy.