Taxman not so keen to give firms Time To Pay

The extension of the 'Time to Pay' scheme was a popular move. But will it actually work in practice?

Last Updated: 31 Aug 2010

In advance of the Budget, a survey by the Forum of Private Business found that ‘Time to Pay’ – the Government scheme whereby firms can defer their tax payments – was the most popular of all the state support schemes, with two-thirds of respondents in favour. So when Alistair Darling announced on Wednesday that it was being extended for another four years, there was much rejoicing. The only trouble is: recent evidence doesn’t exactly suggest that HMRC is taking a more sympathetic approach. Just ask Highland Airways…

An interesting report in today’s Times (which we’re enjoying while it’s still free) implicates the Revenue in the collapse of both rail maintenance firm Jarvis and Scottish airline Highland, which both went into administration this week. Highland was the subject of a formal HMRC winding-up order, while the Times reckons the Revenue was also one of the biggest and most aggressive creditors at Jarvis. Its final demand for a £3.2 payment was apparently one of the major reasons why the banks decided to call time on the company (before the Revenue did so directly).

The taxman’s role in the Highland debacle hasn’t gone unnoticed: local MP Danny Alexander told the Times that ‘if HMRC had been willing to live up to its promise to support businesses through the recession, then 100 people would still have a job this morning’. But in some ways it’s not surprising. Small business groups have been complaining for a while that the Revenue seems to be taking a harder line on tax payments, despite TTP. Football clubs will certainly attest to that: it’s largely thanks to HMRC that Portsmouth FC is in the hands of the administrators.

The Government has hailed Time to Pay as a major success, and lots of companies have certainly benefited from it: the Treasury reckons some £5bn of taxes have been deferred in the last six months. That’s a huge boost to SMEs’ cashflow – and a timely one too, given that bank facilities have been hard to come by. But now that HMRC is becoming such an important creditor, it follows that they’ll have to scrutinise these TTP requests even more closely (which also means more work for them). And with the public coffers so bare, they’ll be under pressure not to miss out on a penny.

So although we’re glad to see the extension of Time to Pay, SMEs shouldn’t think that this means the taxman is going to give them an easy ride. If anything, the reverse may be true.

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