Plea to keep 'time to pay' tax scheme

18 June 2010

The government should resist any temptation to axe the 'time to pay' scheme that allows businesses to defer their tax payments.

The call has come from the Forum of Private Business (FPB).

Dropping the scheme could push many thousands of firms into financial trouble, the business group warned ahead of the emergency Budget.

The 'Business Payment Support Scheme' was launched in 2008 in an effort to allow firms whose cash flows had been hit by the recession to re-arrange timetables for paying HM Revenue and Customs (HMRC) VAT, corporation tax and income tax.

So far, some 200,000 businesses have made use of the scheme, deferring over £5 billion in tax payments.

In a FPB poll last year, the scheme was voted the most popular of all the last government's business support programmes. And according to the group's latest Economy Watch survey, six out of ten business owners said they thought that HMRC has been supportive in recent months.

Just 3 per cent of respondents to the survey reported difficulties in accessing the scheme, and only 1 per cent claimed that HMRC's advice had been inconsistent.

Despite the fact that the scheme was extended for a further four years by the previous administration, there have been indications that it is being wound down as part of public spending cuts.

A range of organisations suggest that the rate of approved applications under the scheme is shrinking, particularly for firms owing larger sums of money, and that businesses are being given less time to defer payments, the FPB said.

The FPB argued that, despite the beginnings of recovery in the economy, need for the support service remains widespread. Out of those businesses requiring support in the near future, 38 per cent expected problems meeting their tax payments.

Jane Bennett, the FPB's head of campaigns, described the Business Payment Support Scheme as a real lifeline for many small firms struggling with cash flow.

She said: "Now is not the time for it to go. Re-balancing the economy is clearly a major priority but sacrificing genuine support like this will only jeopardise small businesses and hinder sustained recovery. The message is clear - it is important to preserve 'time to pay' and other viable small business support schemes in the Budget."