Taxman owed nearly £1bn from Time to Pay

THE TAXMAN IS OWED nearly £1bn from outstanding tax debts it allowed to build up from deferral schemes, introduced in the recession.

Nearly £1bn is owed to HM Revenue & Customs as part of the government’s Time to Pay (TTP) scheme, which allows organisations to defer tax payments by up to a year, insolvency trade body R3 has revealed.

Of the £970m still due for payment, £650m of this is money that was not paid within the initial agreed deadline. It is also understood some businesses have deferred payment of their tax debts as many as four times.

Following publication of the figures, R3 is questioning HMRC’s motives in propping up struggling businesses.

“Time to Pay should be used as breathing space for businesses undergoing a time of temporary difficulty. However, if a business is on their third or fourth referral, that should act as a warning sign; it indicates that there are underlying problems with the business’ cash flow,” said R3 president Frances Coulson.

“Research shows that one in four corporate insolvencies are caused by another business going into insolvency – this is known as the domino effect.”

The body is concerned the scheme is allowing businesses to continue trading when they should be seeking professional advice.

A HMRC spokesman said: “The majority of businesses that have entered into Time to Pay arrangements with us are fundamentally viable and are still in business, in no small part due to the practical support provided by our Time to Pay arrangements.

“Around 90% of the tax rescheduled has been paid and this, coupled with the enormous benefits that small businesses deliver to the country through their tax revenues, jobs, and long term expansion, strongly justifies our pragmatic approach.”

Government figures show rejection rates of TTP are increasing, with 3,390 requests denied for the first three months of the year compared with 2,360 for the same period last year.

The number of agreed schemes have also dropped to 32,900 for the first quarter of 2011 compared with 57,800 for the same period in 2010.

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