Insolvency experts have warned the government faces a "ticking time bomb" of company collapses if a lifeline allowing businesses to defer tax payments is withdrawn.

The Business Payment Support Service has helped more than 160,000 businesses but recovery chiefs firms fear the scheme could be axed after the expected May general election, the Independent reported.

Malcolm Shierson, a partner at Grant Thornton, said: "We expect the number of liquidations to shoot up even further when the future government stops extending the time-to-pay tax scheme."

George Bull, head of tax at Baker Tilly, said: "I think to bring down the guillotine after an election would be a grave mistake because the system has worked really very well to help clients who want to pay, but cannot, to get more time to pay.

"If the right was suddenly halted after an election that would be desperately bad news."

However, tax policymakers have shot down any suggestion the scheme will be pulled abruptly.

A Treasury spokesman told the Independent: "The time-to-pay scheme has been hugely beneficial for businesses facing difficulties and will continue to run as long as necessary.

"Any suggestion that it will end suddenly and businesses forced to repay is incorrect and runs counter to what the scheme was set up to achieve."

Further reading:

Time-to-pay arrangements top £4.3bn