HMRC recently issued statistics for the Business Payment Support Service for the three months ended March 2011, their headlines, as you would expect, are the level of support they have provided to date and the reducing level of applications received since the scheme was introduced at the end of 2008.

A closer investigation of the statistics highlights an ever increasing level of applications being refused. During 2009 approximately 240,000 applications were received of which only 2.7% were declined. In 2010 the figures were 139,000 and 6.0% respectively, whilst the figures for the three months to March 2011 are 33,000 and 10.1%. Perhaps the most worrying statistics are revealed when one compares the first three months of this year to those of 2009 and 2010 with the number of rejections for the current year being 3,400 compared to 2,440 in 2009 and 2,369 in 2010, despite a 60% drop in the number of arrangements being applied for. There is no doubt that the trend is an increasing rate of rejection.

Notwithstanding this increase in the level of rejections, HMRC maintain that their criteria for considering applications has not changed since the inception of the scheme. They will support what, in their view, is a viable business. The reality appears to be that, when considering applications, they are requesting more detailed information which highlights concerns which would not have been apparent from a more cursory glance. Inevitably this has led to and will continue to lead to an increase in the rates of rejection.

Despite the increased rates of rejection there does appear to be a future for the Business Payments Support Scheme, HMRC continue to reaffirm that there is no intention to close it down. Realistically, however, gaining acceptance of an arrangement will continue to become tougher as HMRC carry out more thorough investigations into the viability of the applicants and not unreasonably wish to satisfy themselves that they are the bank of last resort and not simply a cheap form of finance.

If you are going to maximise your chance of success, be prepared, make sure your application withstands scrutiny by HMRC. Ensure the application demonstrates the viability of the business going forward and that you have exhausted alternative funding opportunities. Any inconsistencies highlighted by HMRC will impact on the overall credibility of the proposal. There can be real benefits in obtaining an independent review prior to submission to HMRC to maximise the chance of obtaining what may be a last lifeline for the company.

Peter Godfrey-Evans is a Restructuring & Insolvency partner at Mercer & Hole. The views given in this blog are personal to the author, if you would like to discuss the contents of this post with Peter you can call him on 01908 605552.  

• Email This
• Print
• Comments
• Share Link
• Mercer Hole Homepage
• Contact Us

Statistics recently issued by HMRC for the Business Payments Support Service (BPSS) since its inception confirm there has been a 45% drop in the number of arrangements approved for the first nine months of 2010 compared to the same period of 2009, whilst the level of rejections has doubled to 5.2% over the same period. A closer inspection reveals a rejection rate of 6.9% for the three months ending September 2010, indicating a significant upward trend over the last few months.

The information released highlights other changes in ways in which the Time to Pay scheme is being used by taxpayers. Whilst over the period from inception deferrals of up to three months have accounted for 60% of all arrangements, this has increased to 73% for the third quarter of 2010. The average value of each agreement throughout the period has remained static at about £17,000 with VAT deferrals accounting for just under half of all arrangements.

The overriding message is there has been and continues to be a general tightening on the availability of funding through the Time to Pay system. Following the release of this information HMRC continue to maintain that there has been no change in the principles applied when considering applications for Time to Pay agreements. Ultimately recovery of the tax due and viability of the business are their only concerns. The current view from professionals and businesses themselves however is that HMRC are demanding more information in support of applications and expecting businesses to demonstrate that they have exhausted all other potential sources of funding. Such sources include the use of company credit cards notwithstanding the penal level of interest they carry and the potential impact on the company’s viability.

In the coming months HMRC are likely to continue to make Time to Pay arrangements available to what they deem to be viable businesses thus maintaining their argument their policy has not changed. However the change which has led to the reduced availability of funding is that they have become more inquisitive, requesting more information and not accepting all the information given at face value. As a result the viability of more businesses has been called into question.

With economic conditions unlikely to ease in the months ahead, funds from all sources will remain difficult to obtain. Extended credit from the likes of HMRC will be subject to greater scrutiny, with businesses likely only to get one chance. It is therefore essential that a sound business proposition is made which can hold up to detailed consideration. Professional assistance in putting forward requests for funding is likely to help maximise the chance of success.

• Email This
• Print
• Comments
• Share Link
• Mercer Hole Homepage
• Contact Us

The previous Government's support in giving businesses time to pay their their debts to HMRC via the Business Payment Support Service (BPSS) has been widely acknowledged as having provided a lifeline to many businesses. Continued support was assured in their March 2010 Budget although from the increasing number of referrals we have seen in recent weeks there are clear signs that HMRC are taking a stricter view when dealing with outstanding debt. This experience has been supported by information released by HMRC showing there has indeed been an increase in the number of applications being rejected with the rate having risen in the three months to 31 March 2010 compared to 5.3% in the first quarter of last year.

Whilst no formal comment on the continuance of the BPSS has been made by the new Coalition Government, pressure on it to cut the national deficit will inevitably lead to greater scrutiny of all applications made under the scheme. Rejection rates are likely to continue to increase as HMRC will at best apply more stringent criteria when assessing which applications for time to pay arrangements to support. As for existing arrangements in place, breaches of such agreements are likely to lead to support being withdrawn.

As long as the BPSS remains in place it will remain a valuable source of funds for companies able to demonstrate the existence of a viable business. However, businesses that are relying upon rolling over their deferrals are taking immense risk. Alternative funding options need to be explored and be put in place before any deferral period ends. We are seeing an increasing number of businesses following this course. As is always the case the sooner matters are addressed the more likely a distressed situation can be avoided. 

Peter Godfrey-Evans is a Restructuring & Insolvency partner at Mercer & Hole. The views given in this blog are personal to the author, if you would like to discuss the contents of this post with Peter you can call him on 01908 605552. 

• Email This
• Print
• Comments (1)
• Share Link
• Mercer Hole Homepage
• Contact Us

Prior to the Pre Budget Report (PBR) in December, there was speculation that the Business Payments Support Service (BPSS), which provides assistance by agreeing to deferred payments for those businesses facing difficulties, was to be closed. The Pre Budget Report however confirmed the BPSS is to remain in place and more recently, there has been an announcement that the scheme is to be fully extended to partnerships.

The availability of the BPSS for partnerships will be particularly helpful for larger professional partnerships where individual partners have to date been dealt with individually and by different tax offices, leading to the potential for inconsistent treatment. The ability to deal with a single office will be a considerable benefit.

HMRC have reiterated the basic principles underlying the circumstances in which support will be given, the key one being that in their opinion they must be satisfied that the business remains viable. In addition, to obtain support the business must be in genuine difficulty, unable to pay their tax on time and likely to be able to pay their tax given more time.

In the PBR it was announced that in the future, probably from April 2010, HMRC will require an Independent Business Review to be carried out where the debt exceeds £1 million; details of exactly what is to be required have yet to be determined.

Notwithstanding these developments there is a general feeling which is echoed by comments in the press that HMRC are taking a much stricter line when dealing with time to pay applications and more are being refused. Contrary to the guidance given in their manuals, HMRC appear to be demanding more information to support any agreements. In addition, any breaches of agreements previously made are likely to lead to enforcement action being taken by HMRC.

Whilst the above may appear to provide mixed messages, the bottom line appears to be that HMRC will support what they believe to be viable businesses. Applications must be well prepared and realistic, and failure to meet previously agreed schedules is likely to result in termination and institution of recovery proceedings. Should you require assistance in making such applications, or require help approaching HMRC, then please do not hesitate to contact me.

Peter Godfrey-Evans is a Restructuring & Insolvency partner at Mercer & Hole. The views given in this blog are personal to the author, if you would like to discuss the contents of this post with Peter you can call him on 01908 605552. 

• Email This
• Print
• Comments
• Share Link
• Mercer Hole Homepage
• Contact Us