Don't rely on Time to Pay, firms told
Small companies could be at risk if they rely on the taxman to help with VAT payments once the headline rate rises to 20 per cent from January, advisers suggest.
Official figures show that, in the third quarter, HM Revenue & Customs almost halved the amount of tax on account, from £830m in 2009 to £460m this year.
In the last quarter alone, the value of these ‘Time to Pay’ arrangements dropped by 16%, according to independent finance provider Syscap, which obtained the figures.
Where HMRC does grant a deferral, the terms of the agreement are “getting increasingly restrictive,” the firm said, pointing to shorter repayment timetables.
That means 12-month repayment plans, widely offered last year, are now less likely to be offered to struggling firms than agreements lasting for three months or less.
And when HMRC does, in principle, agree to defer a firm’s tax payments, its officials sometimes insist on alternative measures before agreeing to put them on a timetable.
They suggest a bank loan or even request that the taxpayer settles up with the department with a credit card which, when paying tax, incurs a handling fee.
Not only are these changes “clear confirmation that HMRC is making it harder for companies to defer tax payments,” but they also imply Time to Pay is on the way out.
“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,” added Syscap chief executive Phillip White.
“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.”
In line with comments from HMRC, companies looking to renegotiate existing repayment plans are among those whose affairs will receive the most scrutiny.
However Syscap signalled that the prospects for existing Time to Pay users who hope to secure new arrangements were bleak, as some “are simply being refused.”