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HMRC “Time to Pay” – time to stop?

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I had a very interesting conversation with a successful CEO/turnaround expert about the HMRC’s “time to pay” scheme, which allows small businesses to defer VAT payments. The scheme, introduced at the beginning of the recession, has helped thousands of smaller businesses through the cash crunch.

As we reported recently, the HMRC is now beginning to tighten up the scheme, making it increasingly difficult for companies wishing to defer more than £19,000 to get the VAT leeway. Businesses reacted strongly, arguing that the economic climate is still dire and that the support should continue. One said: “If the government restricts this scheme too early they will have a big issue with companies being forced into insolvency.”

However, as expressed in my CEO-conversation, there is a moral question about the “Time to Pay” scheme: “If, as a business, you have never needed HMRC support, why should government keep your competitors afloat?” He calls the deferrals, in effect, “politically motivated and totally unregulated” loans that take no view about the ability of the business to pay the money back.

He compares them to the self-certified mortgages – “liar loans – that were so prevalent in the nineties and early noughties when aspiring home-owners only had to state their incomes in order to secure stratospheric loans. And look where that got us…

“The ‘Time to Pay’ scheme simply extends the time that companies don’t adapt to the new reality”.

Harsh words indeed, when thousands of jobs have probably been preserved by the HMRC scheme. The question now is: should the scheme be withdrawn to force struggling companies to take the necessary steps to survive?

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