One announcement of the Pre-budget report of 25 November was a new service for businesses in temporary financial difficulty that were unable to pay their tax bills. They would be able to spread their bills over a timetable they could negotiate with the business support service of HMRC. This service would cover all taxes paid by the business, including Corporation Tax, VAT, PAYE, Income Tax and National Insurance Contributions. Although interest would be charged on late paid tax it is anticipated that this rate would be lower than that of bank borrowing.
A key requirement is that contact is made with the business payment support service’s helpline before the due date of payment of the tax. The helpline would only be able to deal with requests in advance of the tax being due. If approach is made after the due date then it would not be dealt with by the helpline, but rather by the local tax district dealing with the business’ tax affairs. The local district may be less sympathetic than the dedicated helpline.
Since November, HMRC have issued guidance on the operation of the service. The guidance is welcomed as it covers some very practical matters, such as mechanism where a partnership (or partner of a partnership) is experiencing cash flow problems.
Two particular matters within the guidance that caught my eye were the review of agreements and the interaction with the Construction Industry Scheme (CIS).
The guidance accepts that a payment agreement may be negotiated in good faith but the taxpayer then experiences unexpected, further, cash flow problems and who cannot meet the agreed payment profile. HMRC will consider such circumstances on a case by case basis. Again, the key is to notify HMRC of the further problems before a payment is due.
CIS allows certain contractors in the construction industry to receive payments gross of tax. There are very strict conditions to be able to qualify for gross payments. The guidance confirms that negotiation of a payment profile with HMRC will not deny “gross status”. This is a welcome confirmation as receipt of invoices net of tax can only exasperate a cash flow problem.
In the round the business support service is a welcome announcement and HMRC have issued some helpful guidance. Well done!