Large #tax repayments outstanding under Time to Pay scheme
The tax authorities could be facing as much as £650 million in unpaid business taxes as a result of a scheme designed to help firms struggling to meet their liabilities.
The Time to Pay scheme was set up during the height of the recession to allow businesses that were finding it difficult to fulfil their VAT, corporation and income tax obligations more leeway in paying.
From the launch of the scheme in November 2008 to March 2011, some 400,000 arrangements have been agreed between HM Revenue and Customs (HMRC) and firms.
In total, £7.4 billion of taxes have been deferred, with the vast majority paid at some stage.
But figures from R3, the insolvency trade body, suggest that £970 million is still currently outstanding. Of that sum, £320 million is on track for payment. That, however, leaves £650 million which has not been paid according to the original timing plans and agreements.
Some tax debts, R3 said, have been referred four times.
It seems that HMRC is now having to tread carefully when it comes to dismantling the scheme. If agreements are concluded at too quick a pace, a number of businesses could fail.
Frances Coulson, president of R3, said: “Time to Pay has played a vital role in preventing the spike in corporate insolvency numbers that usually follow the end of a recession. However these figures give rise to serious concerns about the way the scheme is operating.
“Time to Pay should be used as breathing space for businesses undergoing a time of temporary difficulty. However, if a business is on their third or fourth referral that should act as a warning sign; it indicates that there are underlying problems with the business’ cash flow.”
Frances Coulson went on to point out that research indicates that one in four corporate insolvencies are caused by another business going into insolvency.
This means that, should the businesses who have had multiple Time to Pay arrangements fail, not only will the Government be left out of pocket, but a considerable number of businesses would be left exposed.
HMRC asserted that the outstanding £650 million of tax debt would be retrieved through new Time to Pay agreements or through the usual channels of debt collection.