Time to Pay for large businesses - requirement for an Independent Business Review
The measure
Today the Chancellor announced an extension of the Time to Pay scheme (also
known as the Business Payment Support Service) for 'as long as it is needed'.
At the same time, HMRC announced that they will require businesses seeking time
to pay arrangements worth £1,000,000 or more to provide an Independent Business
Review ('IBR') in support of their request. HMRC will informally consult on how
this will work prior to implementation.
Who will be affected?
All businesses who are in genuine difficulty, unable to pay their tax on time (eg
income tax, corporation tax, VAT, PAYE or National Insurance), and can
demonstrate that they will be likely to be able to pay if HMRC allow them more
time, will be able to take advantage of the extension. To date (since 24
November 2008), this scheme has allowed over 160,000 businesses, employing more
than 1.2 million people, to spread over £4 billon of tax under the scheme.
In terms of the new IBR requirement, HMRC estimate that this will affect 300-400
businesses annually, or one in every thousand businesses seeking time to pay; in
their view, this represents 'a very small minority of substantial businesses
with substantial debts'.
In practice, financial difficulties within major UK businesses will tend to have
disproportionate consequences on the economy as a result of the knock-on effects
to suppliers, lenders and employees in the supply chain. In this sense, HMRC
support is a significant boost to the underlying economy.
When?
This will be implemented from April 2010.
The extension of the scheme is a welcome development in supporting companies
with financial problems.
However, to date, many taxpayers have found it a difficult process to persuade
HMRC that a deferral of any significant sum is justified (HMRC admit that
increasing volumes of applications have stretched their resources). From April
2010, HMRC now promise a 'swift decision', based on an IBR paid for by the
business. The cost/benefit to the businesses involved will depend on the
detailed requirements and the facts of each case, but given the importance of
these businesses, we would encourage HMRC to implement this measure in such a
way that burdens to business are minimised and the cash-flow benefits available
are delivered to deserving cases in a more timely fashion.
