What does the future hold for companies in Time to Pay Arrangements with HMRC

A few months ago I blogged on HMRC’s Business Payments Scheme, giving some guidance on what directors of struggling businesses should think about to give themselves the best chance of putting in place a time to pay arrangement, but forewarning that the Revenue could be expected to take a more robust stance some time down the line.

My experience since then is that both HMRC and most companies in time to pay arrangements have merely been treading water – there has been no real improvement, nor for that matter any major deterioration, in the companies’ financial position and HMRC have not yet moved the goalposts.

Many commentators, particularly those involved in the insolvency profession, are of the view that it remains to be seen whether time to pay arrangements will ultimately turn out to be a good, or bad, thing for the economy overall – a good proportion of Midlands based companies in time to pay arrangements will eventually go into liquidation – for them all that entering into the ttp arrangement will have done is defer the inevitable, often increasing the government’s write off – how does that increased write off compare with the costs associated with losing that business now?   In reality, we will never know the answer, but what is clear is that the government should be applauded for trying to support the Midlands economy in a practical way rather than merely putting the boot in and forcing companies into liquidation as was the case in previous recessions.

The main question directors of businesses that are already in such an arrangement are asking themselves is just how are they going to get out of it?  Given the vagaries of the economy, they are relying on a combination of ongoing HMRC indulgence and a measure of good luck.  As good luck tends to only happens singularly, while bad luck happens in spades, some guidance from HMRC as to their likely approach going forward would be helpful, if only to help directors understand the full extent of their difficulties and plan accordingly.  It is for this reason that the Michael Izza, the head of my governing body, the Institute of Chartered Accountants in England & Wales, is asking the Treasury to clarify HMRC’s approach to collecting in the arrears.  When someone like Mr Izza write to the Treasury, you know there is an issue, and while Mr Izza has finally decided to address something us IPs have been talking about for the last 12 months or so, his concern is better late than never.  If I hear the Treasury’s response, I shall summarise here in my blog.

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3 thoughts on “What does the future hold for companies in Time to Pay Arrangements with HMRC

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  • July 19, 2010 at 8:17 pm

    Excellent Blog Paul, and unfortunately, I agree with you. Too many managers are relying on a dose of good luck. We have helped literally hundreds of companies reschedule their arrears, and in many cases, the long-term solution to their problem is within their grasp. Often, they will know what they need to do to restore the company’s viability, but will lack the time, the skills or the focus to be able to achieve this without external assistance. This does not require luck, but does need a director to be proactive. If more directors sought advice from a specialist when trying to deal with Crown arrears, there would be a higher success rate for Time To Pay arangements. Was it Arnold Palmer who said “The harder I practice, the luckier I get” – he recognised that luck had little to do it.

  • July 20, 2010 at 12:53 pm

    Paul, it’s why there will always be a place for IPs – all too often directors see the rescheduling of arrears as the only action they need to take to resolve the difficulties faced by the business- they return to doing what they have always done, getting the outcome they always got. The changing of directors mindsets is one of the major challenges we as IPs face – only when the business is well and truly in the last chance saloon, which is more often than not where we come in, do many directors change, out of necessity, but by then it is often too late in the day to save the business in its present form / in the current legal entity. I suspect we will see a good many more failures, but smaller ones, in years to come as people are made redundant from larger employers and go on their own – only to find that they do not have the full range of skills necessary to run their own business successfully. Truly successful business people recognise not only their own limitations but those of the business, whether that be a lack of knowledge or a lack of skills or resources, and they do something about it before it becomes a real problem. Adopting a proactive stance has some cost implications, which many will be unwilling to bear in such a cost focussed economy, and requires management to be bold and confident – with low all round skills and an uncertain economy, I suspect many within management will simply bury their heads and work harder rather than smarter.

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