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HMRC: No longer the lender of last resort?

HM Revenue & Customs has seldom been out of the news over the past few months – often for the wrong reasons! But if you take a step back to examine how it has fared during the recent turbulent economic conditions, what’s the verdict?

Recent headlines have suggested that HMRC preys on small businesses and employs unfair tactics in imposing fines for poor record-keeping among small and medium-sized enterprises (SMEs) while allegedly offering ‘sweetheart’ deals to larger companies.

But despite this, there must be some recognition that, in the vacuum of commercial lending, it became the ‘lender of last resort’ for many SMEs for a long period from 2008 onwards.

True, this perception has led to HMRC being accused of supporting many ‘zombie businesses’. This reputation may be justified at least in part, but the Business Payment Support Service should also be credited with saving a huge number of viable businesses from the scrapheap too.

It is therefore sad that this all looks set to change just when businesses need it most. As a systemic culture of late payment grips the credit culture of the UK and liquidity ebbs from the supply chain and commercial lending markets, there are also signs that HMRC is getting tough as fewer Time to Pay (TTP) arrangements are being granted each year.

At the same time HMRC also seems to be more robust in its recovery strategy of repeat offenders or businesses which stray from the agreed plan. In fact, highly motivated third party collections agencies are being employed on a success basis to recover outstanding amounts.

This move coincides with HMRC deciding to stop publishing statistics relating to the success of the TTP arrangements in terms of deferring and collecting overdue tax arrears.

With the last statistics published in June 2011, it will be very hard to gain any real transparency on the effectiveness of the arrangements going forward.

With 2012 underway, businesses must prepare themselves for a less sympathetic hearing if they are projecting arrears. For businesses already in an arrangement, it is important to stick to the repayment schedule or face vigorous recovery of arrears from HMRC. As for the zombies, it remains to be seen if they will be put to rest or whether another lender of last resort will step in to keep them alive.

Alex Hilton-Baird
managing director
Hilton-Baird Collection Services

Hilton-Baird: Autumn statement comment

The Office for Budget Responsibility’s downward revision of the UK’s economic growth forecast has made it even more important that George Osborne’s initiatives help UK businesses access the funding they require.

As expected, the introduction of a £40bn credit easing programme was confirmed to underwrite bank loans to small businesses under the National Loan Guarantee Scheme.

Whilst encouraging, given that it is hoped to reduce the cost of borrowing by around 1%, our concern is whether this will address the more pertinent issue of access to finance for small and medium-sized enterprises (SMEs).

The key question is whether any such measure will alter the banks’ strict lending frameworks given Basel III and capital efficiency requirements, and if so, how long will it take to implement?

On the other hand, we are pleased to see the Seed Enterprise Investment Scheme to encourage budding entrepreneurs to set up new businesses, as well as the new £1bn business finance partnership for medium-sized businesses.

Of perhaps greater significance is the extension of the Enterprise Finance Guarantee, which will now make firms with a turnover of up to £44m eligible to apply for funding of between £1,000 and £1m under the scheme.

An additional facility we would like to highlight invoice finance, which remains a fantastic solution that helps sustain a business’ cash flow in all circumstances.

Its availability and flexibility, are absolutely vital to any business and this will be especially true in the coming months as UK businesses prepare for the challenging Christmas and post-Christmas period, when cash demand typically increases and widespread late payment becomes even more of a challenge.

Credit and Reputations

These are challenging times to work in the credit industry. When the whole of the world is at panic stations about country credit rankings, government debt, business debt, let alone personal debt – the industry has its work cut out holding up the responsibilities end of the debate at the end of a telephone line with a debtor.

We are working in times of forbearance for personal collections and government prompted “time to pay” policies for businesses falling behind with their crown debt. Those at the epicentre of the financial world – banks – have not been allowed to fail. And how time to pay policies can be reconciled with the premise of the Insolvency Act, which seeks a level playing field of solvent companies, is anyone’s guess.

Pity then anyone with the job title – debt collector, bailiff or insolvency practitioner. We run awards promoting best practice and success for these sectors so we know what we’re talking about. Every year we’re in the news for simply being preposterous enough to believe people who work in these sectors can get awards for their good work. This year we really are touching a nerve – the Evening Standard has written about October’s Insolvency & Rescue Awards no less than three times – and I don’t remember them writing about any of the thousands of jobs or viable businesses saved by those shortlisted.

Here at Credit Today we’re used to it. We’ve had comedians refuse to hand out the award for Alternative Lender of the Year and even the occasional egg throwing threat at one of our events from a vigilante consumer site.

Sadly, those that believe in the adversarial nature of the creditor debtor relationship – most of the mainstream press it seems – are missing the point. Engagement between creditors and debtors is the order of the day. At Credit Today’s Utilities and Telecoms conference in windy Blackpool last week there were many examples demonstrated of constructive relationships between the two sides. Debtor support group P*lymouth CAB and energy provider EDF Energy demonstrated how they had teamed up to provide an alternative focus for debtors* to engage with the firm they owe money to.

Both reflected on the number of people that were ready to call the CAB office rather than EDF to provide the real reasons for why they couldn’t pay – often based on unique circumstances to do with their lives they felt uncomfortable relating to a commercial organisation. The benefit for EDF was the ability to understand better a silent part of the customer base it had previously been unable to contact.

The Thames Water speaker who spoke about their firm’s debt amnesty initiative to write off past debts so debtors would come forward and register to pay ongoing bills was equally poignant on the need to find new ways to connect with debtors.

The industry is demonstrating innovative ways of working and engaging with debtors in these difficult times. How the industry tackles the way it presents itself with debtor group representatives and the media will become ever more pressing as disposable income continues to shrink. We’re ready, as ever, for a no doubt bumpy ride.

Kamala Panday, publisher, Credit Today

Response to Noddle

Three months ago Callcredit announced a revolution in the way consumers can access their credit report with Noddle, the first free for life service. We decided to trial the service until our full launch in the autumn and the results are proving very interesting.

Consumer response has been very strong. We wanted to restrict the numbers to 10,000 people over the six month trial but within weeks double that number had asked to get involved. Clearly there is real consumer demand for genuinely free access to their credit report.

I am certain that over time, the provision of access to a basic credit report as part of these types of services will be the norm. I am sure there will be room for premium products too, providing they really add value, so my industry colleagues don’t need to worry too much!

But what I have found particularly positive is that several banks are keen to have conversations about how a version of Noddle, without the financial product element, could support their citizenship agendas, by for example helping educate consumers who may be over-indebted.

• Banks are clearly putting real effort in to help consumers who are getting in to financial difficulty;
• This is important work and I feel that we need to do what we can to support it.

That is why one of the outcomes of our trial is that we are working on a version of Noddle specifically designed to support this positive agenda.

Tom Ilube, managing director consumer markets, Callcredit Information Group:

Tell us what you think

As you will have noticed, Credit Today has a new website.

As part of the new site’s development we factored in your feedback, whether as readers of the print edition and old website or as delegates and sponsors to our conferences. This is the first stage in a series of improvements we will be making.

Navigation

We have streamlined navigation. A consistent feature of the feedback we received was that it was often difficult finding information from credittoday.co.uk.

Now if you want news, just click the ‘news’ tab from the topmost navigation bar to access the main news page. On the left of the news page you will see numerous subsets of information including:

• Company news
• Consumer Q&As
• Features
• Letters
• News analysis
• Profile
• Special reports
• Trade Q&As

. . . and much more besides.

Blogs

Blogs are a new feature. We are inviting industry leaders, commentators, regulators and readers to provide blog posts and engage in discussions about the credit industry. As a reader you can comment using the ‘disqus’ option below each blog post.

All you have to do is enter your email address (we won’t spam you), your name and your comment. Tell us what you think.

Video

On the homepage we now have a video feature. The video carousel enables you to view Credit Today videos, past and present. We will be developing more video content in the coming months, including feature interviews with thought leaders and practitioners as well as regulators. Tell us what you would like to see.

Finally, we have a new Knoweldge Bank. You’ll find reports and whitepapers from leaders in the industry as well as supplement from Credi Today. The knowledge bank will be updated over time with the aim of becoming an invaluable resource.

We hope you enjoy the new credittoday.co.uk.

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