Small, one person businesses or contractors who supply goods or services could be at risk of non-payment if the clients they supply have deferred their tax bill. The state initiative, known as Time To Pay (TTP) or Business Payment Support Service, allowed companies to defer their tax payments to HMRC which has allowed around 170,000 some financial breathing space through the economic downturn. However, no checks have been made on how these companies will manage to pay the money in due course.
P&A Partnership Insolvency Experts said, “The worrying fact is that the financial state of the company has never been investigated and whether they will be able to pay the tax in due course has never been established.”
They also commented that while TTP helps firms to survive through difficult times, the initiative also “merely puts off a severe problem for another day”. Overall, this means that all creditors and suppliers are at risk.
P&A continued, “The position from a suppliers’ and creditors’ perspective is quite worrying; they will have no knowledge of the financial situation of the company and may increase their exposure as the business continues to trade. And here is the danger, if the company goes into an insolvency arrangement later and it transpires that it was insolvent when it took the ‘Time to Pay’ lifeline, then liability falls back on the directors personally for wrongful trading.”
The total amount of delayed tax payments owing to HMRC totals £3 billion, consisting of PAYE, National Insurance Contributions, Corporation Tax and VAT. Those firms requesting a tax breather are not being asked to make all creditors aware of their position. However, recently a VAT bill of £168,000 was settled with HMRC without any checks on the company finances overall.
HMRC said that their Business Payment Support Service was targeted to help ‘viable businesses. They went on to say, “We assess and monitor the risks inherent in these arrangements, including the risk of deferring tax for businesses that have the ability to pay us on time and in full, as well as the risk of agreeing time to pay for businesses that are not viable and will later fail.”