Time to pay and business payment support service
The measure
The Chancellor has indicated his intention that the 'business payment support service' and the 'time to pay' schemes should be extended for the whole of the next Parliament. This represents only a minor clarification since last December when he said they would remain for 'as long as needed'.
There is no change to last December's announcement that businesses seeking time to pay arrangements worth £1,000,000 or more will be required from April 2010 to provide an independent business review (IBR) in support of their request. HMRC held informal consultation workshops throughout January this year and further guidance on the process is expected to be published shortly.
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 they are likely to be able to pay if HMRC allow them more time, will be able to take advantage of the scheme. From 24 November 2008 to date, this scheme has allowed businesses that together employ over 1.4 million people to defer payment of over £5 billion of tax.
In terms of the new IBR requirement, HMRC estimate that this will affect less than 0.25% of businesses annually. In their view this represents 'a very small minority of businesses with substantial debts'.
When?
The schemes are already in operation and the implementation date for IBRs remains 6 April 2010.
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, continued HMRC support is a significant boost to the underlying economy.
To date many taxpayers have found it a difficult process to persuade HMRC that a deferral of any significant sum is justified and increasing volumes of applications have stretched HMRC 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. Given the importance of these businesses, we continue to 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.
