Some businesses may have been alarmed by The Independent's report yesterday that a "tidal wave of business failures" may result from the winding down of the Government's Time to Pay scheme. I hope that I can allay any concerns.
Time to Pay is not being "wound up". As the Chancellor has said it will stay in place for "as long as needed". Perhaps more importantly, the idea that it could contribute to even a single company failing shows a complete misunderstanding of the scheme.
"Time to Pay" or the Business Payment Support Service was set up by the Government in 2008 to help businesses struggling to pay their tax bills due to the strain brought on by the global financial downturn.
It works by allowing viable businesses, experiencing cash-flow problems, to pay their tax bill over a longer period of time. Firms can call Her Majesty's Revenue and Customs directly and in most cases agree terms over the phone.
This means, for example, that a manufacturer in Newcastle employing 100 staff and experiencing a cash flow problem could agree with HMRC to spread a £100,000 tax bill over a longer period of time. The result is that the company can keep paying its staff, purchase materials to keep trading, meet its obligations to customers and creditors while spreading a tax payment over several months that would otherwise have been lost if the company had gone out of business.
The service has been a lifeline, allowing over 160,000 firms employing 1.2 million people more time to pay their tax bills. It's working well for the Exchequer too – even better than we expected. Over 90 per cent of these businesses are repaying their deferred bill on time and it is clear that without the scheme many of these companies may have failed and their staff been made redundant. We want to continue to help businesses through the difficulties they are facing and the Time to Pay scheme will continue to play a key part in this. Small businesses are the backbone of the British economy and have a vital part to play in our economic recovery.
Stephen Timms is Labour MP for East Ham and Financial Secretary to the Treasury. HMRC's Time to Pay service can be contacted on 0845 302 1435