Insight Associates provide outsourced accounting and Finance Director services to ambitious and growing businesses. We work as your only resource or with existing staff to give you complete financial support including monthly management accounts, high level financial advice, robust controls and financial systems, funding and business planning, payroll & compliance, VAT returns and statutory compliance.

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Tuesday, May 11, 2010

Applications for HMRC "time to pay" arrangements

It was reported in Accountancy Age, and by our good friends at KSA Group yesterday that HMRC is apparently adopting a hard line with applications to its Business Payment Support Service (BPSS).

This service set up late in 2008 to support struggling businesses during the recessionary times has doubled the number of applications it has rejected in the last quarter over the same period last year. This has lead commentators to suggest that HMRC is taking a hard line and this is all part of their general tightening up.

A Freedom of Information request by Syscap showed that HMRC rejected 11% of applications in the first quarter of 2010 compared to 5.3% in the same period last year.

Our view is perhaps a little different. Certainly we have seen no evidence of a tightening of any criteria by HMRC or of them taking a tough line to get a time to pay arrangement in place. This appears to be as easy as it ever was, with a simple telephone call. Where there is certainly evidence of a hardening approach is when companies default, and here HMRC are coming down very hard and very quickly. However, that is easily averted if a company believes it will have difficulty making a payment by simply getting in touch with HMRC again.

We have completed very successfully many deals for our clients over the past 18 months, some seemingly pushing the limits a bit. None have really seen any resistance.

However perhaps it is our approach to this that is making all the difference. We firmly believe that in seeking a deal from HMRC the company should look upon it in the same way as it would bank borrowing. It should be carefully planned and work should be done to ensure that not only is the deal sufficient (perhaps combined with other strategies) to resolve the businesses short-term cash flow difficulties but that the repayments are affordable. This means that some good solid cash planning should be completed with "what-if" scenarios and realistic assumptions. It is here where we believe we have been very successful in helping our clients, as many would have struggled to put this together properly by themselves.

There is also one other feature which determines the ease of putting a deal in place, and that is the amount that is being deferred. There is no doubt smaller amounts over a relatively short period are easier to deal with and get agreement to. Larger amounts are generally beyond the remit of the BPSS and get referred to local office. Here our experience time and time again shows that there is a huge inconsistency in approach and much more scrutiny applied. Indeed it has recently gone even further with a requirement for an "independent business review" if the amount is over £1m.

If your businesses is struggling with cash flow, please do get in touch for a free no obligation initial chat. There are many strategies available that may be able to ease the burden!

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