A blog by Martin Williams, external affairs spokesman of Graydon UK, focusing on business risks - from fraud to late payment. Martin has has spent the last 35 years in the credit information industry, and has been with Graydon UK, one of the top five commercial credit agencies in the UK, for the last 20. Apart from his PR duties, he teaches credit analysis to risk professionals and helps educate SMEs on the importance of maintaining a good credit rating. Martin is a Fellow of the Institute of Credit Management and is a sitting member of the Institute's Think Tank. He was also honoured by Credit Today, after being included on their Credit 100 list of people who have had the greatest impact in the credit industry during 2008, 2009 and 2010.
|
|
18 Dec 2009
Companies who have taken advantage of HMRC's Business Payments Support Service during the recession, which allowed them to defer tax payments in order to stave off insolvency, had better be in much better shape in 2010.
Sorry to put a dampener on peoples' Christmas spirits, but I suspect the tradtional increase in insolvencies seen coming out of a recession will be exacerbated in 2010 when the Taxman comes a calling looking for repayment of deferred tax. Some companies who are still suffering in the economic downturn may not be able to afford the bill.
During the recession, the HMRC agreed deferred payments with over 200, 000 companies. But this empathy with cash strapped organisations can't continue forever, particularly with the government having such a big hole in its coffers. The other thing we should not overlook is that the Taxman is on record as the biggest Petitioner for Winding Up companies in the Courts (for non payment of tax debts.)
I reckon therefore that all the signs point to the HMRC taking a firmer line in collecting what is owed to them in 2010, and those companies still left struggling to make ends meet after 2 years of economic downturn are likely to perish.
For many, the HMRC's deferred tax scheme has been a real life saver- for others I fear, it has simply delayed an inevitable demise.
Visitor comments
I normally find your comments in this column Martin useful and interesting, but I fear on this occasion you have rather oversimplified the position.
I do agree that there are a lot of fragile companies out there, who have not dealt with the structural issues in their business, and used BPSS as a stop gap. One day they will have the pay back. However, many (most?) businesses using BPSS have successfully repaid what is owed and bought time when they needed it. Used wisely BPSS is like a short-term overdraft helping to deal with peaks in the cash flow. Quarterly VAT liabilities are a great example of this, where the wise business ensures it is paid off before the next quarter is due.
We have used BPSS very successfully with many clients, some more than once, and I am convinced it has saved businesses that would have otherwise unnecessarily gone to the wall.
It is by far the best initiative the Government have introduced throughout this period and it works. But like everything in this life if you abuse it you will pay the price!
Posted by: Garry Mumford , 18 Dec 2009
Thanks Garry for your comments- appreciated.I think we are saying the same thing really- I've made the point that the scheme was for many a real life saver and like you said, may have been one of the more successful government schemes during the downturn. My fear is though that the companies that continue to struggle through two/three years of downturn generally perish eventually. For this type of company, taking advantage of any helping hand during that period may well just postpone inevitable failure. i think that's one of the reasons why you see insolvencies increase at the tail ends of recessions. Happy Christmas and New Year to you!
Posted by: martin.williams , 21 Dec 2009
Many insolvency guys I have spoken to recently believe 2010 is going to be a blood bath ...and I think they are likely to be right.
Despite what many would have us believe we are far from out of the woods yet and many businesses will fail because often their management have not got to grips with the fundamental issues. BPSS can help, but as you say is not the long term answer.
Management need to get a grip on their numbers, especially cash, which they are simply not doing in many cases.
Posted by: Garry Mumford , 21 Dec 2009
I have to say that I think the support scheme has been a godsend for many of my clients. It makes sense for people to be paying their tax in smaller chunks to ease cashflow.
For self employed businesses I hope it leads to a move for at least quarterly payments on account to be introduced.
I agree HMRC have a habit of issuing winding up orders but the businesses that use the scheme correctly can significantly benefit.
Posted by: Phil Hendy , 21 Dec 2009
Thanks Garry for your comments- appreciated.I think we are saying the same thing really- I've made the point that the scheme was for many a real life saver and like you said, may have been one of the more successful government schemes during the downturn. My fear is though that the companies that continue to struggle through two/three years of downturn generally perish eventually. For this type of company, taking advantage of any helping hand during that period may well just postpone inevitable failure. i think that's one of the reasons why you see insolvencies increase at the tail ends of recessions. Happy Christmas and New Year to you!
Posted by: martin.williams , 21 Dec 2009
Frances Coppola on Sort out the credit sloths
TaxTeddy on EU ding dong over accounts filing Exemption
martin williams on Insolvency stats are head-scratchingly strange
Robert MMoore on Insolvency stats are head-scratchingly strange
slightly optimistic on PIGS Keep Europe in an Economic Trough
Search thousands of financial jobs:
Search thousands of financial jobs:
Adding your comment