The end to HMRC free banking?
As I look through my window on a wet October day in 2009, my thoughts turn to those Contractors and Sub-Contractors for whom holidays are well and truly over - and I am not talking about the bucket and spade variety!
The impact of the recession and the lack of bank support over the last year has encouraged many companies to take advantage of HM Revenue & Customs (HMRC)’s relaxed attitude to paying their Corporation, PAYE and VAT commitments. If you are reading this and thinking yes, that’s my company, you will also know that the support provided by HMRC over the last year, as the banks stopped lending, has been a key lifeline to contracting businesses. The trouble is, as we all know, holidays eventually have to come to an end and it looks like we are approaching the end of HMRC’s payment holiday offers.
It is a frightening thought, but HMRC acknowledge that there is over £3.1billion of tax arrears owed by companies operating in UK Plc. This statistic is acknowledged at a time when we all know that government spending is far and away exceeding income, and there is significant political pressure building (that’s the wrong type of building by the way) to reverse this situation.
Over the last year those of us involved in advising struggling businesses have looked to HMRC, or the Crown as we often refer to it, to assist struggling companies by agreeing short term payment holidays and the deferred repayment of tax arrears. Call me cynical, but I have no doubt that this policy was given a green light by the treasury, knowing full well that a banking sector on the brink of failure would have been unable to provide the short term support needed by industry.
So what happens now? If the Crown has been told to turn off the supply of free credit and insist on the repayment of tax arrears, will the banks agree to take up the slack? I, for one, seriously doubt it! The UK banking sector is only just beginning to recover from one disaster (at the taxpayer’s expense) and I just cannot see the same banks agreeing to provide further funding at a time when it is needed most, unless they are absolutely sure they will be repaid.
If you feel that your company is about to be affected by HMRC’s change in attitude to companies with crown debt, or any other series of unfortunate events for that matter, you should not hesitate to take appropriate advice as soon as possible. The number of options (and there are many), for sorting out problems in your business, decline with the passage of time.
Builder and Engineer - Oct 2009
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Peter Vinden is a practising adjudicator, mediator, expert, conciliator and corporate re-structuring advisor to the construction industry. He is Managing Director of Vinden and can be contacted by email at email@example.com