Time to Pay tax time bomb looms
FIRMS that have taken advantage of HM Revenue & Customs VAT holiday are being warned to get their business in order before their Time to Pay arrangements come to an end.
According to figures more than 16,000 businesses in Yorkshire have delayed payments through the initiative worth £278m in VAT owed.
Since November, HM Revenue & Customs (HMRC) has reached more than 200,000 agreements with businesses across the country to spread in excess of £3.5bn in tax.
However, Andy Wood, a partner as The P&A Partnership and Yorkshire chairman insolvency profession trade body R3, warns that many firms have not used their breathing space to get advice and rethink their business strategies.
He said that the Time to Pay arrangements are typically for six months and a large number are now coming to an end.
“This support from the Government has been a life-saver for thousands of businesses, particularly with the void in normal funding sources such as overdrafts and factoring facilities,” Mr Wood continued.
“Mentions of green shoots however are misleading – the market is not going to change for most companies in a six month period. They should be looking at every area of their operation and targeting new markets in new ways, change pricing policies and maybe product ranges.”
Mr Wood said that HMRC was starting to take a harder view on tax owed and was not allowing renegotiation of terms.
Legal proceedings can be initiated if a company can’t pay its tax bill.
Moreover, Mr Wood said that most Time to Pay requests are made over the phone with approval usually taking minutes.
He said that this raises the issue of whether enough due diligence had been carried out to ensure that all businesses receiving agreements were actually viable in the long-term.
“If companies without a viable long-term are kept artificially alive under Time to Pay then their creditors are put at risk and there are fewer funds available for healthy companies experiencing temporary cash flow difficulties,” Mr Wood added.
He is now urging businesses to seek help from their accountants who can assist in producing robust cash flows and profit forecasts.
