Business Recovery and Insolvency Practitioners

NEWS: HMRC Risks £2.4BN on Deferred Tax Bill

Added: 15/06/2009

Advisers have raised fears that the HMRC will have to write off a proportion of the taxes it has deferred for and on behalf of businesses and the sum so far put on hold by the HMRC has reached £2.4BN.

It is widely believed that the Revenue is at risk because a number of the companies that have agreed deferral payment schedules will, in due course, enter into a mode of insolvency.

Increase in Companies Securing Deferred Tax Arrangements

Since the arrangements were put in place in November 2008, the number of companies securing the arrangement have increased dramatically, and between 19th April and 24th May, these have shot up from 110,000 to more than 135,000 with another £400M of tax deferred.

Speculation on Deferred Tax Write Offs

There is much speculation on how much of the deferred payments will have to be written off through companies going into a mode of insolvency.

Of the £2.4BN, £1BN steps from VAT deferrals which equates to about 1.5% of the Treasury’s projected VAT receipts for 2009/2010.

Deferred Tax Payment Scheme Will Continue

Clearly the HMRC are taking a risk, but as they readily accept, the alternative is to place companies into a mode of insolvency and where potentially a large proportion of the money will be lost. The HMRC recognise that a proportion of the funds will be lost, however, they have confirmed that the scheme will continue to be available as long as there is a demand.

The repayment schedules range normally between 3 and 6 months.

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