The government’s tax and VAT Time to Pay scheme designed to help companies with their cash flow during the recession, may be more difficult to use if the business support centre is closed.
Alistair Darling announced the HM Revenue and Customs (HMRC) Time to Pay scheme in November 2008. The scheme enables companies to defer their corporation tax and VAT bills and is designed to help businesses with their cash flow during the recession. So far according to HMRC figures, it has helped up to 150,000 businesses delay the payment of their tax.
The scheme has been operated through a dedicated business support centre. Directors have been able to contact the support line and agree their requirement over the phone. Generally an agreement to defer the payment of tax for a 3 to 6 month period could be agreed without a lengthy investigation into the company’s circumstances.
Unfortunately for many small businesses, it seems that this fast track system may be short lived. If industry rumours are to be believed, the fast track service may be closed by 31st December 2009.
There are a number of possible reasons for this change. However, it seems likely that as the government’s own coffers become increasingly bare, there is a need to make sure that where tax is due and can be paid, it is paid on time.
There is no suggestion that the Time to Pay scheme is due to be scrapped all together. However, it seems that companies will have to go through a far more rigorous assessment regarding why they need to defer the payment of tax and over what period this deferment will last.
This change would not be good news for some companies which under greater scrutiny will not be eligible to take advantage of the scheme. However, on reflection, it may not be such a bad thing for the wider economy. One of the criticisms of the Time to Pay scheme has always been the very real possibility that the company will not be in any better financial position at the end of the deferment period. As a result it will still not be able to pay the tax and VAT owed. The scheme has thus simply resulted in a deferment of the business being declared insolvent and facing liquidation.
If the suggested changes to the way the Time to Pay scheme operates mean that companies which were always doomed to fail are not given a deferment period, this may be an improvement. Problems will have to be tackled face on rather than swept under the carpet and left to get worse.
However, following a tightening of the rules, it is inevitable that business which should be given help may face delays in receiving this. As a result they may too be forced into liquidation thus making a mockery of the scheme. Whatever the outcome of the changes, it seems likely that the number of business insolvencies will continue to increase into 2010.
Archive for October, 2009
HMRC Fast Track Time to Pay Scheme Likely to Close at Year End
Friday, October 9th, 2009Pensions – UK Workers Must Fend For Themselves
Monday, October 5th, 2009
The pensions landscape in the UK is in a state of rapid, evolutionary change. The realities of a pension-funded retirement that applied to our parents’ generation have changed utterly, and now seem generous in comparison to what we are experiencing today.
The facts that follow here are compelling, and remind us that, more than ever, we ourselves must secure our retirement lifestyle by making our own pensions provision. The slogan ‘if it’s to be – it’s up to me’ has never been more true than in the area of pensions planning today.
The need for us to work with our financial adviser to put a retirement plan in place has become a matter of extreme urgency. Here are some points to consider, which may come as a surprise to those who still believe that pension planning can be relegated to the back of their mind.
1. The Basic State Pension
The value of the Basic State Pension grew throughout the 1960s and 1970s linked to average earnings, through the National Average Earnings Index. Several generations quite legitimately saw the relatively generous state pension as the keystone of their pensions income in retirement.
The (relative) comfort enjoyed by our retired parents in those days has clearly lulled many of us into a false sense of security: research from the Prudential showed recently that 27% of those retiring in the coming decade (2010 – 2020) will depend solely on the Basic State Pension plus their own savings.
However, in 1979, the state pension was switched from its link to earnings, and instead linked to prices, through the Retail Price Index. As a result, the buying power of the state pension has gradually declined.
Today, in 2010, the full basic state pension for a single person is just ?95.25 a week, which is less than ?5,000 a year. Furthermore, new statistics from the central European research agency Eurostat shows that 1 in 3 UK pensioners is now living below the poverty line, i.e. on an income which is less than 60% of the national average wage.
2. Pension credit can top up the Basic State Pension to ?130 a week for a single, or ?198.45 for a couple. However, this is means tested. In other words, you receive it only if you have no personal savings or additional income of your own.
3. Looking aside from government or state pensions provision, the picture in the private sector, for workplace or company pensions, is just as bleak. The commitment of our employers to make pensions provision for our retirement is also being gradually dismantled. Private companies, hurting due to the recent recession, are now looking at reducing their pension commitments in the drive to cut costs.
The result of these strategic shifts often sees the risk of pension investment shifting away from the employer, and towards the employee. Companies are pulling back from salary-related ‘defined benefit’ pension schemes, where workers are guaranteed a certain income in retirement linked to their final salary, and their length of service. Many of these schemes are already closed to new members, and active membership in these high quality schemes is expected to fall from 2.5m people today to 1.5m by 2050.
The ‘bottom line’ truth that emerges from these various aspects of the pensions scene is clear. We would be well advised not to look on the ‘nanny state’ or our employer as our sole means of income in retirement. Taking steps now to build our own personal pension is looking like an increasingly prudent strategy. If it’s to be, it’s up to…. me.
