Accountancy Age reports that the ICAEW is to write to the government and ask what will happen to the debts built up under the Time to Pay scheme (TTP) introduced by HMRC late 2008.
In another story last month Accountancy Age described how the scheme was being abused, according to Andy Wood of R3 Yorkshire. In his opinion HMRC will be lucky to collect 75% of the arrears built up in the Time to Pay scheme.
We see TTP as a powerful tool to help short term cash flow problems, but if some companies are becoming reliant on this as unofficial "life support" and cannot function without a new deal every few months, then it is being abused and the company is likely to face aggressive action by the tax creditors.
The message we would give directors is: get costs down, put staff on short time working, drive marketing (and hopefully sales) manage costs / cashflow daily and focus on a recovery programme. Yes use TTP where necessary to survive a short term cashflow hole but do not build this in to your business plan as a permanent long term solution.
If this informal turnaround approach does not work and HMRC withdraws TTP support, then consider using a company voluntary arrangement to restructure the company.