Taxman toughens up on Time to Pay

Businesses hoping to put tax bills on ice are receiving a frostier reception from HM Revenue & Customs, to the concern of business groups and advisers.

It has emerged that HMRC has knocked back twice the number of Time to Pay applications compared to last year.

For some time insolvency experts have said the taxman has been taking a tougher line on Time to Pay arrangements, which allow businesses vital relief from its tax bills by allowing them to defer payments.

This view appears to have been borne out. A freedom of information request made by finance providers Syscap found 11% of applications had been rejected in the first quarter of 2010 compared to 5.3% last year.

HMRC insists it has not hardened its stance but business representatives have expressed concern. “This is the most important time for small businesses,” said Stephen Alambritis, business spokes­person for the Federation of Small Businesses.

“They need cash freed up to buy stock and advertise to take advantage of improving conditions. We hope that HMRC is not taking a crude view and assuming that everything is hunky dory when their political masters have told them to be more helpful through the TTP.”

To 28 March 2010, 310,000 Time to Pay arrangements have been granted since the scheme began, totalling almost £5.3bn.

But recently the taxman has said companies trying to defer more than £1m would have to submit an independent business review, suggesting more information is required, despite the eligibility requirements remaining the same.

Brian Johnson, insolvency partner at HW Fisher, said: “Having granted Time to Pay arrangements through 2009 based on very little information, HMRC have now wised up to the folly of that policy. While they were sympathetic, perhaps overly so, last year, their attitude has clearly hardened this year.”

An HMRC spokesman said: “There have been no changes to HMRC’s eligibility criteria for agreeing Time to Pay arrangements. Each request is considered on its own individual merits.”

Further reading:

HMRC rejects 6000 time-to-pay pleas