More than two-thirds of the total tax bill that HM Revenue & Customs has deferred for enterprise and the self-employed under ‘Time to Pay’ agreements is yet to be paid as the businesses initially agreed.
According to official figures, of the £970m owed to HMRC under the scheme, only £320m is scheduled to be paid, meaning no arrangements are in place for the remaining £650m.
Taken with evidence that some customers are on their fourth deferral, the data indicate a significant number of firms “will be unable to pay their liabilities when they fall due.”
Released to parliament, the figures also raise concern about how the Business Payment Support Service is running the scheme, insolvency body R3 added.
Its president Frances Coulson said: “Time to Pay should be used as breathing space for businesses undergoing a time of temporary difficulty.
“However, if a business is on their third or fourth referral that should act as a warning sign; it indicates that there are underlying problems with the business’ cash flow. It should make HMRC question the financial viability of that business.”
Tax officials have already said that firms which try to defer paying tax more than once will face “additional questions” about what steps they are taking to settle their debts before a second deferral is approved.
And in November last year, the Revenue’s terms of agreement were described as “increasingly restrictive,” with deferrals being handed out for three months, down from six months previously.
It is these repeat customers of Time to Pay who R3 says are the most vulnerable, and the most potentially damaging to other companies, particularly the smallest of suppliers.
Mr Coulson said: “Should the businesses who have had multiple Time to Pay arrangements fail, not only will the government be left out of pocket, but a considerable number of businesses would be left exposed.
“Businesses should be properly assessed at the outset to ensure that they are using the scheme appropriately and not as a long-term credit facility.”
Since Time to Pay launched, in November 2008, HMRC has approved 28,800 arrangements to defer a total of £7.37bn in tax, of which £6.31bn has already been paid.