There has been much talk in the media over public service cut-backs but what is relatively unknown is the additional pressure to HMRC over recent years due to the chaotic implementation of various software systems. These software systems were intended to assist the user but have as usual caused divisions internally as to just how useful they have been considering the huge cost to the public purse. I know from conversations with HMRC staff that the systems have been ‘a bit of a nightmare’ to implement and ‘not user friendly’ enough. You probably won’t be surprised to learn they were designed to be simple to implement and to be extremely user friendly.
To make matters worse HMRC is under increasing pressure to bring in more revenue yet staff numbers are under pressure and the heads of departments expected to deliver cost savings. The Public and Commercial Services Union (PCS) has instigated protests over the cut backs in benefits and proposed job losses resulting in a recent short strike of 55,000 call centre and face to face enquiry centres across the UK. So if you are seeking a time to pay arrangement be aware the voice at the other end of the phone may have their own problems too.
There have always been opposing views on the value of time to pay arrangements (TTP) with those on the supporting side saying the HMRC arrangements keep employees in work. On the opposing side however there are those who insist they are of little value and keep zombie companies afloat when they should be dead and buried. Whoever is correct the future of time to pay arrangements is in question once again as staffing reductions are very likely to impact on the number of proposals it is possible to monitor.
It is extremely difficult to establish accurately just how many proposals are now declined as HMRC no longer publish the relevant figures ceasing in early 2012. The last accurate figures published by HMRC from 2011 showed and sharp increase in the number of proposals declined in the twelve months from 2010-2011 from 2.7% (2010) to 9.3% and I suspect based on personal experience this number has increased even more sharply. Undoubtedly whatever your politics the change of government has made a huge difference to the change of stance of HMRC. They are under increasing pressure to bring in more revenues from this government and with less staff.
So what is the likelihood of getting a time to pay arrangement agreed with HMRC in the current environment?
Frankly the vast majority of TTP arrangements are doomed before they start as there is usually little thought put into them by either party. The company director often under pressure agrees to almost anything to get rid of the HMRC pressure and the HMRC are juggling a lot of cases. HMRC in their defence have an almost impossible job as they are being asked to do more for less and are working in difficult circumstances so they are also likely to be demotivated.
In order to agree a time to pay arrangement you need to have motivated people to monitor them and the terms agreed. All of this effort takes time and staff. I believe this area will and is having a definite impact on the likelihood of getting a time to pay arrangement agreed with HMRC. It is difficult but I would put the chances of acceptance at around 30-40% at best based on personal experience over the last twelve months. I can’t prove this of course as I mentioned earlier the figures are not published now but if the number of proposals turned down is anywhere near this figure then there would have been huge increase in the number of TTP arrangements declined.
So what happens if your time to pay arrangement fails? At the moment they (HMRC) are particularly aggressive when pursuing failed agreements and will inevitably wind the ‘culprit’ company up almost immediately and certainly within days unless there are exceptional circumstances. A key element in failing time to pay arrangements is when due taxes are very often overlooked and not paid – this triggers a default and the subsequent lack of confidence by HMRC.
One thing for sure is that with banks unwilling to lend despite all the political and banking rhetoric and HMRC getting tougher it can only be bad news for SMEs.
Written By Mike Smith