| Update: Time To Pay Scheme |
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15 January 2010 Requests for funding to meet critical January 31 tax payments deadline up 62% Flood of appplications for "Time To Pay" scheme expected Demand from businesses for loans to help pay tax bills is accelerating ahead of the critical January 31 tax payment deadline says Syscap, a leading independent finance provider. Syscap says that it currently* has 427 outstanding requests from businesses specifically for the funding of tax payments up 62% from the 263 outstanding requests that it had in the same week last year. Syscap says that the average size of this tax funding request is now £450,000 - more than twice last year’s average of £200,000. On January 31 all unincorporated businesses from sole traders through to large partnerships such as law firms will have to make a payment on account of half of their previous year’s tax bill.** Says Philip White, CEO, of Syscap: “Feedback that we have received from customers suggests that over the last six months HMRC has been gradually making it harder for businesses to access its “time to pay” scheme". “Time to pay” is designed to allow viable businesses to defer tax payments during the recession. HMRC now expects businesses to sell “non-essential assets” to pay their tax debt. Syscap says HMRC has also become more reluctant to extend businesses credit once their existing “time to pay” agreement has come to an end.
HMRC is now asking “time to pay” applicants to provide more paper work such as cashflow forecasts, management accounts, a forecast of the profit and loss account, balance sheet and a letter from their bank. Syscap warns that the impending January 31 tax deadline is likely to see a rush of applications to the “time to pay” scheme and that there is a real concern that HMRC might not have the capacity to properly deal with a sudden surge in applications. Comments Philip White: “As the recession drags on more companies are burning through their liquid assets and some are finding it harder and harder to get their customers to settle bills on time. That means we may see a record number of perfectly viable companies unable to pay this January’s tax bill from their cash reserves.” “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.” “Normally a business might just go to their bank but many small and mid-sized businesses are finding that the bank they have been with for years is no longer interested in lending at a sensible rate or that they want to tack on huge arrangement fees even for small loans". “Although HMRC currently will not force a business to sell its “essential assets” to pay a tax debt it may expect them to sell more liquid assets. A poorly timed sale of assets could cost a business dearly.” Syscap explains that the January 31st payments on account are based on a business’ previous year’s tax payments. As many businesses will subsequently have seen profitability slide they may also need to make an appeal to HMRC to have the assessment reduced. Adds Philip White: ““Time to pay” has been one of the most popular of the Government’s solutions to the recession but with that post Lehman Brothers sense of crisis subsiding the Government is getting less free with its credit.” “However, if a business does not get a deferral of their tax payment and can not fund that tax payment through the commercial market then they are faced with a real problem.” *As of January 13 **Where tax bill is more than £1,000 See coverage of this press release below: |
