Concerns are mounting that the time-to-pay scheme may be axed following the government’s emergency Budget on 22 June.
Business groups have voiced concerns that the time-to-pay scheme which allows companies to defer tax payments may be discontinued or wound down following the new government’s emergency Budget on 22 June.
Stephen Alambritis, chief spokesperson at the Federation of Small Businesses, urges that the government consider a phased reduction in the scheme, which was introduced by former Chancellor Alistair Darling in 2008, rather than a ‘cliff-edge’ approach. Alambritis adds, ‘Some 200,000 businesses have signalled that they still require time-to-pay, and of these 10 per cent may be unable to carry on if the scheme were withdrawn.’
Edward Rimmer, chief executive at lender Bibby Financial Services, says that withdrawing the scheme could endanger the recovery. He states, ‘The continuation of the scheme is simply a necessity at this point in time if the government does not want to force large insolvencies among a number of barely-afloat businesses.’
The introduction of time-to-pay was widely welcomed as a lifeline to help businesses avoid going under in the recession. While Darling promised in his March Budget to continue the scheme, the new government has so far made no such commitment. Fears for the future of the initiative have been fuelled by anecdotal evidence that the tax office is already turning the screw.
Tracy Ewen, managing director of commercial finance company IGF, says, ‘It has been suggested that HMRC, over the last six months, have been making it harder for applicants to access the scheme. They appear to be asking for much more information including cash flow statements, management accounts and forecasts of profit and loss and balance sheets.’
Kathryn Hiddleston, a restructuring tax partner at Grant Thornton, says a formal tightening of the rules around time-to-pay has hit larger companies. ‘What happened in April 2010 was that HMRC said, “we’re not a bank, we can’t afford this”. What has changed is that for applications over £1 million, an independent business review must be submitted to show how the applicants plan
Hiddleston argues that tax officials should take a ‘commercial view’ and realise that helping businesses stay afloat will yield more tax revenues in the long run.