Don’t become reliant on ‘Time to Pay’, urges tax expert


AN accountancy firm is urging struggling businesses to break their dependency on a government tax support service, as the taxman takes a tougher stance on companies using the scheme.


Experts at Moore and Smalley Chartered Accountants and Business Advisors believe HM Revenue & Customs (HMRC) is rejecting more requests for arrangements under the Business Payment Support Service (BPSS) amid fears it is being used to prop up doomed firms.


The BPSS, also known as Time to Pay, was launched in 2008 to meet the needs of all businesses and individuals experiencing difficulties in paying the tax due in full and on time.


The scheme, extended to continue until 2015 in last year’s budget, has enabled thousands of businesses to defer some tax payments and negotiate a payment timetable. Around £2.5bllion of tax has been deferred under the scheme so far.


However, Damian Walmsley, partner at Moore and Smalley, is urging businesses to ensure they are doing all they can to avoid becoming dependent on government support as rejection rates for the scheme continue to climb.


He said: “The taxman has explained that in circumstances where organisations are coming back to them time and time again, it will ask more detailed questions as to why they are making repeated requests. It believes businesses making numerous requests will have to work harder to convince them it is a viable company, and that tax deferral is the right option for them.”


Recent figures from HMRC show the taxman has doubled its rejection rate of Time to Pay agreements to 5.2 per cent from January to September 2010, compared to 2.6 per cent for the same period in 2009. This meant there were just 114,600 Time to Pay arrangements from January to September 2010, compared with 196,200 for the same period in 2009.


Damian added: “HMRC was never designed to be a credit line for businesses and the Time to Pay scheme will end eventually as the economy recovers. For many businesses using Time to Pay repeatedly, withdrawal of support would a devastating blow.


“Our advice to businesses is to ensure they are doing all they can to make tax payments on time. If they do require HMRC support, they need to be doing everything in their power to get back on track and demonstrate to the taxman they are a viable business.”