By John Onslow, chief executive officer, at Centric Commercial Finance, www.centriccf.com
One of the more surprising aspects of the recent recession has been the relatively low level of company failures. This is down to a number of factors, but one of the most important has been the forbearance of her Majesty’s government when it comes to collecting tax; by some estimates as much as £50bn is currently awaiting collection.
The government’s TTP (Time To Pay) scheme has been used and sometimes, abused by a wide variety of businesses — after all this has until recently been the source of ‘free’ credit with little worry of any serious consequences if you needed a little more time to pay.
In all honesty the scheme has allowed many businesses to stay afloat during the worst global recession any of us are ever likely to experience. This means that the government’s TTP must surely rank as one of the more successful government initiatives aimed at business in recent times.
However, there is strong evidence to suggest that this is now changing, that the powers that be have decided to send an unequivocal message to those in default as well as those who proffer advice in such circumstances. We are no longer a soft touch and if you default on an agreed payment plan then watch out.
Perhaps the best known example in very recent times has been the case of Oddbins. I, like many others, fully expected HMRC to support the CVA. The numbers told us that this was an easy decision to make. And yet HMRC said ‘no’ and the business entered into administration the next day.
There have also been plenty of examples closer to home with companies that my own business has funded. What has become abundantly clear is that if you break the TTP agreement then it is open season. A petition will be issued and dialogue re-opened only once the petition debt is paid. It’s a crude, if effective, strategy.
In the last edition of this very publication, the point about HMRC’s tougher attitude was discussed. The retort from the spokesman was that it is not within the power of HMRC to end the TTP scheme. This may be technically true but that does not mean of course that they cannot change tact when it comes to enforcement of outstanding monies.
It would be fascinating to be a fly on the wall when such matters are discussed at HMRC; politically this is dynamite. Surely someone at HMRC has come to the conclusion that by making an example of the few, and at the same time being prepared to write-off serious money on a case-by-case basis, they will better safe guard for the British tax-payer the billions currently outstanding. As a trade off it’s difficult to dispute the logic.
As someone who supports and funds SMEs I have an enormous amount of sympathy for anyone trying to stay afloat in the current environment. There is little doubt that this will cause a lot of pain for businesses caught up in this new, more aggressive initiative.