Business News
Debtors facing new hard line from HRMC
HRMC is tightening its stance on Time to Pay arrangements and CVAs following evidence that has emerged highlighting this and the recent rejections of CVAs despite being previously supportive, as noted by Tony Groom from K2 Business Rescue.
“HMRC website guidelines to case officers indicate that they should attempt to get arrears repaid within 12 months with longer periods being the exception,” explained Groom. “This may explain why HMRC is now rejecting more proposals because its objective is to maximise early repayment contributions for clearing VAT and PAYE arrears rather than accepting those that propose a realistic repayment schedule with lower early repayments.”
“HMRC website guidelines to case officers indicate that they should attempt to get arrears repaid within 12 months with longer periods being the exception,” said Groom. “This may explain why HMRC is now rejecting more proposals because its objective is to maximise early repayment contributions for clearing VAT and PAYE arrears rather than accepting those that propose a realistic repayment schedule with lower early repayments.”
CVA stands for Company Voluntary Arrangements, and are based on legal agreements with creditors to allow companies breathing space and opportunity to continue in a trading capacity whilst paying off their debts - essentially staying afloat whilst working their way out of trouble.
Applications for CVAs have been predicted to increase; however, evidence produced at a recent Credit Management conference by Baker Tilley insolvency practitioner, David Hudson showed that HRMC’s new hard line stance looked to counter balance these applications with stricter procedure.
“A CVA is like a legal ‘time to pay’ arrangement to give the company a breathing space,” said Hudson. “Banks tend to like them because they should end up with a better return for creditors. It’s a means of saving the company, not punishing the directors.” Hudson also added that “HMRC is not consistent across the board. In some situations it will be very aggressive, but in others it will give a company more time to deal with debt,”
Treatment of outstanding debt is set to receive the same treatment, by way of a tougher outsourcing of collection of debt. This follows a successful scheme last year in which £140m in debts was collected across 4 agencies. This is looking to be rolled out again with a £30m-£70m outsourcing contract out for tender.
Hudson stated, “My views are that there will be better consistency if it outsources collection. The process is driven through profit and we believe that will make a more aggressive culture. Is that good for economy or bad?”
