South: 'Give HMRC credit where it's due'

HMRC was accused recently of pushing businesses into collapse as it was revealed that they were behind almost half of all winding-up petitions filed in the last six months of 2009. This however tells only half the story, says Thames Valley accountants and business advisers James Cowper.

In 2008 HMRC introduced its Business Payment Support Service, known as the Time to Pay policy, which was again extended in December’s Pre-Budget Report. The Time to Pay policy offers businesses who are struggling financially the opportunity to defer tax payments and so far it has helped well over 200,000 businesses.

Chris Lee, a partner at James Cowper, said: “It is always easy to knock HMRC, particularly with some high-profile companies, such as Portsmouth Football Club, facing collapse because of money owed to the Revenue currently making the headlines.

“However, HMRC’s Time to Pay policy has been a lifeline for an enormous number of businesses and the government recognises its value having extended the scheme in December’s PBR. In this instance I think credit should be given to the Revenue for its efforts in helping companies stave off financial collapse.”

This so called ‘soft approach’ by HMRC does not mean however that the Revenue will refrain from acting if a business fails to respond to tax demands. HMRC is also more likely to take action if both a company and its directors are creditors to the Revenue.

“HMRC’s role is to collect unpaid taxes and it will seek to do so in all cases. Companies and individuals that fail to engage or respond to demands from HMRC will inevitably feel its full force,” says Lee. “The head in the sand approach simply will not work.”

James Cowper offers this advice to businesses that are falling behind with their tax payments:

• Do not ignore the problem in the hope that things will pick up. HMRC is prepared to listen and help businesses if businesses respond and enter into discussions with them.
• Do not attempt to negotiate with HMRC directly, without first speaking to your accountant. HMRC may not be particularly tough negotiators, but it is an extremely complex area and any solution suggested by HMRC may not be the best for you and your business.
• Be realistic. James Cowper’s Business Recovery and Insolvency practice has seen many scenarios where business owners have been over-ambitious in what they promise to the Revenue under time-to-pay arrangements and then a few months down the track find themselves once again unable to meet their obligations. It is essential to be realistic.
• Talk to your accountant and seek their advice. Your accountant will be able to offer advice on how to best manage cashflow. Your accountant will also be able to offer advice and negotiate with HMRC on your behalf. Working with your accountant gives the added message to HMRC that you recognise and are addressing any problems that may exist.