HMRC risks £2.4bn on deferred tax bill
Taxman might have to write off £2.4bn of deferred tax as many businesses are still going bust
Taxman might have to write off £2.4bn of deferred tax as many businesses are still going bust
Advisers have raised fears that the taxman will have to write off a large
proportion of the tax it has deferred for business after Accountancy
Age learned that the sum so far put on hold by the taxman has reached
£2.4bn.
Experts believe the revenue is at risk because many of the companies that
have agreed deferral arrangements under the
Business
Payment Support Service (BPSS) will still go bust.
The billions now deferred have been agreed since the arrangements were put in
place in November. Between 19 April and 24 May, the number of companies securing
‘time to pay’ arrangements with the taxman shot up from 110,000 to more than
135,000, with another £400m of tax deferred.
The HM Revenue and Customs’ scheme has been welcomed by advisers but
companies still have tax liabilities hanging over them in the event of an upturn
and the taxman will may have to endure the shortfall for longer if a recovery
fails to materialise.
‘The big issue is how much of that will actually disappear into insolvencies
and the revenue ends up never seeing the money,’ said Stephen Coleclough,
indirect tax partner at
PricewaterhouseCoopers.
Around 42% of the £2.4bn, or around £1bn, stems from VAT deferrals, an HMRC
spokeswoman confirmed. This equates to about 1.5% of the Treasury’s projected
VAT receipts for 2009/10 of £64bn. However, more companies are expected to take
up the option.
‘The taxman is definitely taking a risk but what’s the alternative?’ added
Coleclough.
‘They could push a business into insolvency by not granting it [a deferral]
which means everyone loses.’ Paddy Behan, VAT partner at Vantis said: ‘It’s a
racing certainty that a proportion of deferred VAT will not be collected because
companies will go under. If they keep a business going there will be a loss, but
the loss they will suffer will be less than if they took a hard line and forced
a business down.’
An HMRC spokeswoman said the BPSS would be available as long as there was
demand.
She added the majority of businesses had agreed repayment timetables of
between three and six months. Businesses who wish to reschedule VAT, PAYE and NI
contributions or to revise existing time-to-pay arrangement can also contact the
BPSS although this will depend on individual circumstances.