Are HMRC Withdrawing Support for Time To Pay Arrangements?

I have heard through the grapevine that HMRC are looking closely at withdrawing support for the Time To Pay arrangements from this April and these arrangements have been so popular in the past with SMEs in clearing company debt; too popular, perhaps. Some may be surprised to hear me say, but I believe generally that HMRC do a good job in very difficult circumstances.

IT System Changes and Staffing Losses

HMRC have had to endure IT system changes which have not always been as successful as they should have been. Cut-backs in staffing numbers reduction in pension benefits as have all civil servants along with chopping and changing of what jobs are completed where. The communication systems were antiquated though they are trying to catch up and some at the higher levels finally have access to external email. There is an awful lot of confusion inside and outside regarding the new phone systems which frankly leave a lot to be desired as there is only so many times you can hear Vivaldi or Green Sleeves before you start banging your head on the desk in tune with the beat.

Attempted humour aside, any cut-back on the SMEs ability to agree a time to pay arrangement would be a severe set-back to those companies who genuinely need help when coming out of recession. We deal with company debt and HMRC negotiations as part of our work and the time to pay arrangement has been a valuable tool and saved some companies - no question.

The longest recession in recorded history

Coming out of a recession is bad enough but coming out of the longest recession in recorded history is another. I am hoping that Carney keeps the interest rates down as businesses need as much help as is possible. Okay, I know there will be some out there saying “Well I pay my taxes on time so why shouldn’t they?” I accept the point, but I do come across a large percentage of smaller businesses who have cut to the bone to survive. Once a company does this they are very vulnerable and it is easy to get into difficulty for no other reason than a larger business debtor has decided to pay later than agreed. You can argue these companies should not have placed all their eggs in one basket, but the reality is these smaller businesses represent a significant part of the British economy.

I appreciate these HMRC time to pay arrangements are time consuming and so I assume they are costly to manage and monitor, but what is the alternative to a time to pay arrangement? 

Food Companies Struggling:

Premier Foods is one of the lowest-rated financially healthy retail companies in the UK, according to newly compiled research from Company Watch.

The owner of the Hovis and Mr Kipling brands came in with a H-Score of 14 out of 100, which is judged on aspects such as a business’ balance sheets and the prevalence of intangible assets. Premier Foods has also been in Company Watch’s Warning Area consistently for the past five years, with a health rating score of 25 or below.

The analysis is based on each company’s last five years’ published accounts, as processed through the Company Watch H-Score risk assessment model.

The average H-Score across the whole retail manufacturers sample was 52 out of a maximum 100.

Nick Hood, head of external affairs at Company Watch, said: “Our survey highlights the problems facing retail suppliers. They, like the retailers themselves, are suffering a knock-on effect from a fall in consumer confidence and reduced disposable incomes of shoppers. At a time when like-for-like sales are falling and consumers are demanding evermore value for money through deep discounts, retailers are inevitably making most suppliers share the pain.

“The accounts we examined are mainly for periods ending during the latter part of 2010 and early 2011, which means that these figures do not yet reflect fully the upward pressure on manufacturers’ costs from rising energy and commodity prices. Once these feed through, we can expect the financial health of the sector to deteriorate further, with more manufacturing companies falling into our Warning Area and becoming vulnerable to insolvency or restructuring.”

In total, 173 companies (25%) out of 681 of the UK’s largest food, non-alcoholic beverage and clothing manufacturers, were currently in its Warning Area, with health ratings of 25 or below out of 100.

Dairy Crest, producer of Cathedral City cheese, Utterly Butterly and Clover spreads, fell into the Warning Area category after its March 2011 results with an H-Score of 20 and was pushed deeper when its interim figures to September 2011 produced a lower H–Score of 16.

Drinks manufacturer Britvic, owner of the Robinsons, Tango and 7Up brands, also appeared in the Warning Area with a current H-Score of just 17 out of 100 – a financial rating partially driven by the high level of intangible assets, which are almost 15 times the company’s net worth.

Statistics on all UK companies for the past 14 years show that one in four companies in this ‘red danger zone’ have either gone on to file for insolvency or have undergone major financial restructuring.