By Claire West

Figures from HMRC,show that HMRC is making it harder for businesses to defer tax payments through the ‘Time to pay’ scheme says Syscap, the UK’s leading independent finance provider.

The value of ‘Time to pay’ arrangements granted by HMRC has almost halved over the last year (down 45%) from £830m in Q3 2009 to just £460m in Q3 2010. In the last quarter alone, arrangements have fallen 16% from £550m in Q2 2010.

According to Syscap, HMRC’s data also reveals that the percentage of BPSS requests that were officially refused by HMRC nearly doubled (up 93%) in 2010 to 5.2% of all requests, up from 2.6% of requests officially refused.

‘Time to Pay’ (BPSS) was designed by HM Revenue & Customs to allow viable businesses to defer tax payments during the downturn. It has been seen by many business organisations as one of the Government’s most popular programmes to stimulate the economy during the downturn.

Philip White, Chief Executive of Syscap, comments: “This is clear confirmation that HMRC is making it harder for companies to defer tax payments and the effect is to gradually wind down the ‘Time to pay’ scheme.”

“All the feedback that we have heard from small businesses and the research we have seen from the British Banking Association and the Bank of England is that SMEs are finding it increasingly difficult to get access to competitively priced finance.”

“So the winding down of the ‘Time to pay’ scheme is clearly bad news for businesses that need to keep as much cash back for day-to-day working capital purposes as possible.”

“If businesses are worried that they may not have the cash to pay their tax bill they can longer rely on HMRC being flexible — they need to make alternative arrangements.

“The worst thing that could happen is that a business applies under ‘Time to pay’, gets rejected, and is left in the lurch. We suspect that is now going to happen more frequently.”

“HMRC is also demanding that businesses that apply for a deferral of tax of over £1m have to undertake an Independent Business Review (IBR). The Government’s own figures say this could cost as much as £75,000, and at least £40,000 on average.”

“If you don’t have the money to pay your tax, you are unlikely to be able to afford an IBR.”

Syscap points out that where HMRC does now grant a BPSS agreement the terms are getting increasingly restrictive. For example, in Q3 2010 76% of “time to pay” agreements stated that the business has to repay HMRC in three months or less — in Q3 2009 only 65% on “time to pay” agreements were so restrictive.

Syscap says that their customers have reported significant changes introduced by HMRC to the ‘Time to Pay’ process, including:

Now typically offering payment deferral plans that are just three months long, when last year 12 month plans were widely on offer.
Increasingly requesting that customers apply for a bank loan or even make a tax payment with a credit card, before they can become eligible for assistance through the scheme. Tax payments by credit card incur an extra card handling charge!

Philip White adds: “We are also hearing that companies looking to renegotiate existing ‘Time to pay’ arrangements with HMRC, or secure new arrangements, are simply being refused.”

“The result of these changes is that companies cannot rely on the ‘Time to pay’ scheme anymore.”