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10 December 2009 "Time To Pay" Scheme peaks as HMRC increasingly rejects applicants HMRC starts putting businesses into cold turkey Unincorporated businesses need to start preparing for funding of Jan 31 tax payment deadline The “time to pay” scheme has reached its peak as HMRC appears to be rejecting an increasingly large number of applications to take part in the initiative says Syscap, the UK’s leading independent finance providers. “Time to pay” allows businesses to defer tax payments during the recession. Syscap says that, in the last few weeks, they have seen a notable increase in the number of businesses turning to them to secure loans to meet tax obligations either because HMRC has rejected their application to the scheme or because they have taken a business off the scheme. Syscap explains: “HMRC’s attitude to the “time to pay” scheme has radically changed over the last month. They have progressively raised the approval bar, started asking tougher questions, requested more details and are turning more applications down.” “Those that do manage to secure an agreement with HMRC are now faced with inflexible conditions and much tighter repayment schedules. HMRC is often asking for a big lump sum initial payment which is often several times that of the subsequent monthly instalments.” “They are definitely less willing to bespoke payments to fit the “seasonality” of a business or its cash flow cycles.” Syscap explains that the generous terms initially offered under the “time to pay” scheme were a response to the panic following the collapse of Lehman Brothers. Now that the economy seems to be stabilising, HMRC appears to be starting to wind down the scheme that has provided a vital lifeline to over 200,000 businesses. Comments Mark Gidge: “Businesses can’t take HMRC for granted. If a business can’t fund a future tax or VAT payment out of their cash reserves then they need to look for commercial funding at the same time as applying to HMRC.” “The worst situation for a business is to be rejected by the HMRC for the “time to pay” scheme and then find that they don’t have time to find funding for the tax payment in the commercial market.” Mark Gidge says that many businesses may actually find that getting commercial funding for a tax payment has advantages over the “time to pay” programme. For example, businesses should be able to arrange a schedule that more closely matches their business needs rather than the increasingly prescriptive requirements of HMRC. Interest payments could be set at a low initial level and then increase in size as the business builds up its cash cushion. Syscap adds that if a business has to use the “last resort” HMRC scheme it may cast a shadow over the perceived credit worthiness as it might suggest to lenders that the business was not capable of raising funds elsewhere. Adds Mark Gidge: “Having a history of being on HMRC’s life support system could raise eyebrows amongst lenders in the future.” Syscap says that all unincorporated businesses from sole traders through to large partnerships such as law firms will now need to start planning how they intend to fund their January 31 tax payment. Concludes Mark Gidge: “All the feedback that we are getting is that businesses can no longer rely on credit from HMRC. HMRC is beginning the process of getting back to business as usual. Historically, HMRC has been a pretty unforgiving creditor.” See coverage of this press release below: |
