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? 

Coming Out of Recession – Good News for business?

We are coming out of the longest recession in recorded history so this has to be good news doesn't it? The UK economy, we are told, has the strongest forecast in Western Europe. So, if the signs of consumers finally opening up their wallets are there then struggling companies across the UK should be pleased, and they can pat themselves on the back as having ‘made it through the storm’, right? Well not really. I don’t want to be a dampener on a struggling director’s hopes as there are indicators we can be cautiously optimistic about. The problem is based on past experience having been through three recessions that the most dangerous time for a cash-strapped company is when coming out of recession. The reasoning behind this is simple. If the ‘struggling’ company has cut back to the bone and cannot raise personal finance; ploughed in personal/family cash; reduced staff; sold off assets/stock; maxed out the company credit card and the banks being as helpful as ever and refusing to lend – the ‘straw that breaks the camel’s back’ is usually an influx of new orders.

You may think this is nonsense and that any bank with an ounce of commercial common sense would see a full order book as an indicator of something positive. Not so. We have had many cases where the order books have been full to the brim and the banks have refused to even provide an overdraft. They (The bank) did by the way allow an unauthorised overdraft of as much as the company wanted but at 27.9% APR. Factoring may help but my experience is this usually creates more problems than it solves for smaller companies.

So when orders start to increase and the bank account is empty what can directors do? There are few points to remember. Take a common sense approach and remember that when a patient has been very ill and is still very weak then start with a little of the right food often rather than gorge on too much of anything all at once.

My meaning here is that is important to gear up slowly if the company is cash-strapped and do not over trade and take too much on board. It is easy for a director to convince themselves that the more work you do the better things will get. Not necessarily – it could make matters worse. The fastest way to lose a good name is to let customers down. So, it’s important not to take work on that cannot be fulfilled competently and effectively and getting paid.

A director should set reasonable achievable goals and make sure the accounts/finance department talks to sales and is able to fund the growth. Ensure regular and frequent meetings are taking place and this is the time the director must have his/her finger on the pulse and work even harder and smarter.

If directors are a ‘one man band’ then they should be talking to someone other than a life partner/spouse that will provide an objective, informed unemotional view of the situation. This is an ideal time for the accountants to step in and provide support I would suggest. Whoever the director talks to they must keep the dialogue on-going until the company is back on its feet to make sure there is no disconnect between the service you have provided and what is paid in – not owed in. A business can grow on promises of payment – they need cash.

The nature of the business the directors are involved in will also matter. For example if they are in a building related trade then it may easier to get clients to fund at least part of the project with up-front cash. This can make a big difference to the chances of survival and not. This course of action may be more difficult with other businesses and directors will need to work smarter when providing the services to the client. For example is it worth having a word with your key supplier and showing them the full order book and offer to make them the sole supplier so they can see the benefit of increased sales.

Whatever the director does they must take care and whilst it is good to be cautiously optimistic it is foolhardy to believe simply obtaining lots and lots of extra work in itself will solve the problem – it may just make matters worse. Take care out there. 

Written by: Mike Smith

Barclays bank makes £2.45 billion profit

In the first #quarter of this year #Barclays made a #profit of around £2.45 billion which is well ahead of their expectations.

#Barclays took a £300m hit to cover payment protection mis-selling claims, which has become a major cost in recent moths for most #banks.

In a bid to deal with the problem, it set aside a £1.3 billion cushion after a rise in #PPI claims.

It said the unexpected success were largely down to the UK's retail #banking division and Barclaycard, which both performed well.

Barclays chief executive Bob Diamond has been criticised over his £17.7 million pay package for 2011, which is expected to come under increased scrutiny at the bank's annual meeting on Friday despite recent moves to subdue a #shareholder rebellion.