Financial & Legal News

Time To Pay arrangements: will HMRC continue to bear the burden?

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There is no question that the current economic turmoil has left more and more companies struggling to survive. One of the key ingredients in any company’s survival is their relationship with HMRC.  In recent years the saviour of the struggling business was the Time To Pay arrangement (TTP), where typically HMRC allowed arrears to be paid off over a period of time, on the condition that current liabilities were met as they fell due.

Time to Pay Arrangements Becoming More Difficult to Achieve

In 2009 2.7% of applications were turned down; in 2010 the rate of refusal more than doubled at 5.8%.  In 2010 there was a 60% drop in applicants compared to 2009. New TTP arrangements are becoming more difficult to achieve and HMRC are increasingly unlikely to support circumstances where the original TTP has been met but arrears have built up once again and the company is looking for a further TTP arrangement. HMRC are unwilling to be the long term unsecured financier to the SME sector, as they are now acting upon the fact that there is often wider creditor pressure and they are one on a list of many, albeit they are often, by default, the largest creditor. As a result TTP is becoming more difficult to achieve and many businesses who previously would have secured an arrangement are no longer being successful, and are being forced down the route of an insolvency procedure, or hurriedly needing to raise personal funds to stave off a winding up petition.

Are You Trading Whilst Insolvent?

Also worthy of consideration are the implications for directors when things do go wrong, to ensure that they are not found guilty of wrongful trading or trading whilst insolvent. Matters to be considered include HMRC arrears and whether the company has used Crown Monies to fund the business, and indeed continued to take significant salaries and not met their obligations to creditors.  There should always be a reasonable chance that suppliers can be repaid when companies accept credit.

Seeking Insolvency Advice

The key point is the importance of seeking professional insolvency advice as soon as it is apparent that there is a problem. This will not only protect the director’s personal position but may also help the business to survive and thus safeguard the workforce’s future.

The author, Andrew Bland of DMC Corporate Recovery,is a licensed Insolvency Practitioner and adviser to Pearson Hinchcliffe Commercial Law in Corporate Recovery and Insolvency matters.

Contacting Us

Pearson Hinchliffe Commercial Law offers a comprehensive Corporate Recovery and Insolvency service. To speak to a team leader, Roger Hinchliffe, in confidence, please contact him via the details provided below. 

Please note that the information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Pearson Solicitors and Financial Advisers Ltd or any of its members or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.

This blog was posted some time ago and its contents may now be out of date. For the latest legal position relating to these issues, get in touch with the author - or make an enquiry now.

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