HMRC Time to Pay scheme tightens

26/11/2009

The Time to Pay scheme has reached its peak as HMRC appears to be rejecting an increasingly large number of applications, says Syscap. Time to Pay allows businesses to defer tax payments during the recession, but Syscap has found, in the last few weeks, a notable increase in the number of businesses turning to them for loans to meet tax obligations, either because HMRC has rejected their application to the scheme, or because they have taken a business out of the scheme.

Mark Gidge, of Syscap, says, “HMRC’s attitude to the Time to Pay scheme has radically changed over the last month. They have progressively raised the approval bar, started asking tougher questions, requested more details, and are turning more applications down.

“Those who do manage to secure an agreement with HMRC are now faced with inflexible conditions, and much tighter repayment schedules. HMRC is often asking for a big lump sum initial payment, which is often several times that of the subsequent monthly instalments. They are definitely less willing to tailor payments to fit the seasonality of a business or its cash flow cycles.”

 The generous terms initially offered under the Time to Pay scheme were seen as a response to the panic following the collapse of Lehman Brothers. Now that the economy seems to be stabilising, HMRC appears to be starting to wind down the scheme that has provided a vital lifeline to over 200,000 businesses.

 Many businesses may actually find that getting commercial funding for a tax payment has advantages over the HMRC programme. For example, businesses should be able to arrange a schedule that more closely matches their business needs rather than the increasingly prescriptive requirements of HMRC. Repayments can be set at a low initial level, and then increase in size as the business builds up its cash cushion. There is also the danger that byrelying on the HMRC scheme, a firm may be perceived as less creditworthy.

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