I received an interesting email from business recovery expert Paul Masters of Leonard Curtis, the Mid-Sized Corporate Recovery Firm of the Year 2008 which looked at how delaying UK tax payments can help your business to survive in this recession.
I must point out that this is about the official Business Payments Support Service. It is a big mistake to think that you don't have to talk to HM Revenue & Customs and can just delay sending in the money you owe.
With permission I reproduce the email below.
Subject: Companies are wasting opportunities for survival
Companies may be wasting the opportunity for survival given to them by HM Revenue & Customs ("HMRC").
Speaking on BBC Radio 4's "Today" programme recently Peter Mandelson said that over 170,000 businesses had taken advantage of HM Revenue & Customs' Business Payments Support Service ("BPSS"), resulting in the rescheduling of £3 billion of Crown debt.
These are quite staggering numbers, and suggest that this keystone initiative from the Government has, so far, directly assisted in the preservation of several hundred thousand jobs, through an informal rescheduling of mainly VAT, PAYE and corporation tax debts that the company can't pay when they fall due.
The stated objective of the BPSS is to "meet the needs of businesses affected by the current economic conditions". This is a laudable objective, but the Government seems to have assumed that this short term fix will be adequate to see a business through the recession. In itself, I don't think this is enough, for 3 main reasons:
- Most companies entering into the arrangement without professional advice are likely to ask HMRC to defer over a period which they think they can get away with, rather than what the business can afford to pay.
As a result, many will struggle to meet the payments they have agreed to within a very short period. Directors need to be bold in their requests to HMRC, and properly assess what the Company can afford to pay before approaching them.
- Secondly, this rescheduling will significantly ease the short term cashflow pressure of the business. Most directors will breathe a sigh of relief that this particular problem has gone away... and then get on with "business as usual".
To gain the maximum benefit from the BPSS, they need to have a plan in place to restructure their company; to ensure that when the Time-To-Pay agreement is completed, they are in much better shape to ride out the rest of the recession. If they do this, not only do they have a better chance of survival, but they will also be that much better placed to benefit once the economy does start to pick up.
- Most Time-To-Pay agreements are likely to be completed when the economy is still in recession, or very shortly thereafter, and unless directors have taken the above steps, their company will be no better off than when they started and, in many cases, much worse off, because the company will have continued to incur losses in the intervening period.
As business advisors, and funders, you have an opportunity to talk to your clients and customers to ensure that when a Time-To-Pay agreement is entered into, the company takes maximum advantage of the short term cashflow benefits. This will ensure that the company exits the arrangement in a much stronger position, and also means that it can reap the long term rewards.
You will probably already know that we have a very active and experienced team of people who will be happy to advise your clients and customers on this matter. If you need a refresher on how we may be able to assist, please take a look at our web site http://www.leonardcurtis.co.uk/corporate_strategies
What Is Your Experience Of The Business Payments Support Service?
If you have negotiated a late payment schedule with HMR&C I will be interested to hear about your experience so please leave a comment. By all means do it anonymously.
If you are based in the Midlands, you can contact Paul Masters on 01902 810102.
You can learn more about the Business Payments Support Service at the HMR&C website but Paul has made it clear that professional advice can make a huge difference in putting together the right arrangement.
Similar Schemes Outside Of The UK
Sorry but I don't know if similar delayed tax payment schemes exist in other countries.
If you do, then please leave a comment and any useful links where people can get more information.