HMRC's Time to Pay arrangements

Businesses are reporting that they are finding it increasingly difficult to agree Time to Pay arrangements with HM Revenue & Customs' Business Payment Support Service.

Time to Pay, under which a business can arrange to make scheduled payments of arrears of tax that it could not otherwise afford to pay, was introduced as a temporary measure in November 2008. Since then, HMRC has made arrangements with over 200,000 businesses who were struggling to make up arrears of tax. Over the course of the scheme the payment of more than £5 billion has been rescheduled. 

In the March pre-election Budget, the Labour Government extended the scheme. Although in the early days of the scheme anecdotal evidence would suggest that it was relatively easy to have a Time to Pay arrangement approved, the bar for businesses owing more than £1 million in arrears of taxes was raised in December last year with the introduction of a requirement for an independent business review (IBR) to be carried out. Although IBRs are expensive to undertake, many banks are already requesting such reports from some of their more troubled customers, and HMRC will usually accept the results of an IBR carried out on behalf of a bank as evidence for the purposes of coming to a Time to Pay arrangement. 13 firms were admitted to the panel for the provision of IBRs for the purposes of Time to Pay arrangements, including the "Big 4" accountancy firms. A full list of those firms authorised to carry out IBRs is available from HMRC.

Many business commentators have expressed concern that such a large sum be tied up in Time to Pay arrangements. They warn that such arrangements are simply delaying the inevitable and that once the arrangements to come to an end, the number of business failures is likely to rise. In addition, as HMRC tightens the criteria for acceptance of businesses' proposals for Time to Pay arrangements, some businesses have been unable to agree an arrangement. The number of requests for Time to Pay arrangements that are rejected doubled in the first quarter of 2010, with 11.2% of requests being rejected, compared with 5% in the same period of 2009.

HMRC advises that businesses who are having difficulty in meeting payments should approach the Business Payment Support Service as soon as the difficulty becomes apparent, in order that arrears can be kept to a minimum and to increase the chances of a favourable reception to a proposed Time to Pay arrangement.

If your business is experiencing difficulty in making payments to HMRC, Michelmores can help. The risks associated with a business having cash flow difficulties run wider than the possibility of the business entering into some sort of insolvency procedure - those at the helm who fail to act in a timely manner to minimise the damage could find that they are liable to meet some of the business's liabilities. Our experienced team of business recovery lawyers can help you to make important decisions about the future of your business, before it's too late.

For more information, contact Charles Maunder at charles.maunder@michelmores.com or Sacha Pickering at sacha.pickering@michelmores.com, both partners within the Michelmores Insolvency Team.