HMRC: No longer the lender of last resort?

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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

Posted on 24th January 2012 by Alex Cardno

 

 

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