Is your business suffering a cashflow problem? Are you having problems borrowing in order to pay bills, including your taxes such as VAT and corporation tax? If so, HM Revenue & Customs (HMRC) may have a solution for you.
HMRC has set up a business payment support service (BPSS) designed to help businesses pay their income tax, corporation tax, national insurance or VAT by allowing payment over a period that is as long as they need.
Businesses have always been able to ask HMRC for more time to pay, but the BPSS promises to make this easier by speeding up the process, relaxing the conditions and allowing a longer payment period. HMRC says it will discuss options tailored to a business’s needs and try to agree an affordable payment timetable.
To take advantage of this opportunity, a business (or its appointed tax adviser) should check the guidance on the HMRC website (see below). If this doesn’t answer their questions sufficiently, they can contact the BPSS helpline on 0845 302 1435 well before the date on which the tax becomes payable.
The HMRC adviser will only ask for the information they need to make a decision such as the business’s tax reference number, details of the tax liability, basic information on the business’s cashflow and a proposed payment plan. Where possible, they will then arrange to collect payments by direct debit.
HMRC says that in most instances it should be able to give a decision in about 10 minutes. Decisions will be made on a case-by-case basis and HMRC will consider all requests regardless of the sums. Obviously larger debt and those that are more complicated may require more detailed discussion.
One thing to note is that the BPSS is for new enquiries only. If an HMRC office has already contacted a business about an overdue payment, the business should call that office to discuss further payment options.
Similarly, if a business has an existing payment arrangement but is now concerned that it may not be able to meet the terms, it should discuss this with the HMRC office that agreed the arrangement.
However, if a business receives a warning letter about court action and cannot get through to the office that sent it, it can call the BPSS to explain the situation.
Unfortunately, HMRC will not repay amounts that have already been paid and agree a new arrangement for them, even if the business is experiencing difficulties after paying the tax.
Interest and other charges
No additional charge will be made for agreeing an arrangement under the BPSS, and no late payment surcharges will be made for amounts included in an arrangement. Interest will continue to be charged in those cases where it applies.
However, the main rate of interest for late income tax and corporation payments was reduced from 6.5% to 5.5% on 6 December 2008, and a further reduction may soon be made following the recent cut in the base rate from 2% to 1.5%.
Some late VAT payments give rise to a default surcharge, but HMRC says that any such charge will be cancelled where the agreement was reached after the introduction of the BPSS. Businesses will need to check that this does indeed happen.
In a recession, it is more than ever the case that every little helps, and cashflow is priority. At a time when borrowing is difficult, businesses should certainly take advantage of this opportunity to finance their tax payments at a very reasonable rate.
Paula Tallon is a partner in accountancy firm BDO Stoy Hayward LLP