Insolvencies Increase as HRMC Tightens Time To Pay
Business insolvencies in the UK have increased in the first quarter of 2011 as the HMRC tightens its approach to its Time To Pay rules.
The Government’s Insolvency Service figures show that in the first three months of the year insolvencies in the UK increased by 3.17%, with 4,121 companies failing. At the same time figures from HMRC show that the number of Time To Pay (TTP) requests refused increased to 9.3%, compared to a refusal rate of just 2.7% in 2009.
Peter Whalley, a partner in the Insolvency team at Thames Valley accountants and business advisers James Cowper, said:
“Whilst it is difficult to establish a direct link between the increase in business failures and the tougher stance taken by HMRC it does paint a particularly gloomy picture for struggling SME businesses.”
“With banks seemingly unable or unwilling to lend to SME businesses and with scarce business angel funding I believe the rate of business failures is likely to continue to rise.”
The Government’s Time To Pay scheme offered a lifeline to businesses that were struggling to meet VAT or Corporation Tax demands. Businesses were able to negotiate a payment regime with HMRC spreading payments throughout the year or longer.
“There have unfortunately been instances of businesses abusing the Time To Pay regime, seeking to spread payments when they have had money in the bank. The change of government and the focus on removing the country’s deficit undoubtedly means that there is less political pressure on HMRC to be seen to be helping businesses. It perhaps not surprising that HMRC is taking a tougher stance.”
Any businesses considering negotiating a TTP arrangement with HMRC should be advised to first speak to an insolvency specialist experienced in negotiating the terms of such arrangements.
The picture is not entirely gloomy however, as independent insolvency statistics (provided by Experian) suggest that the number of businesses failing in the South East has slowed down, with just 165 businesses failing in the 12 months from January 2010 to January 2011, a fall on the previous 12 months of 23%.